TY - JOUR

T1 - International taxation and productivity effects of M&As

AU - Todtenhaupt, Maximilian

AU - Voget, Johannes

PY - 2021/7

Y1 - 2021/7

N2 - We investigate how changes in firm productivity after M&As are affected by differences in profit taxation between the target and the acquirer. We argue that tax differentials distort the efficient allocation of productive factors following an M&A and thus inhibit the realization of productivity improvements. Using firm-level data on inputs and outputs of production as well as on corporate M&As, we show that the absolute tax differential between the locations of two merging firms reduces the subsequent total factor productivity gain. This effect is concentrated in horizontal M&As and less pronounced when firms can use international profit shifting to attenuate effective differences in taxation.

AB - We investigate how changes in firm productivity after M&As are affected by differences in profit taxation between the target and the acquirer. We argue that tax differentials distort the efficient allocation of productive factors following an M&A and thus inhibit the realization of productivity improvements. Using firm-level data on inputs and outputs of production as well as on corporate M&As, we show that the absolute tax differential between the locations of two merging firms reduces the subsequent total factor productivity gain. This effect is concentrated in horizontal M&As and less pronounced when firms can use international profit shifting to attenuate effective differences in taxation.

KW - International taxation

KW - M&A

KW - Productivity

UR - http://www.scopus.com/inward/record.url?scp=85102881195&partnerID=8YFLogxK

U2 - 10.1016/j.jinteco.2021.103438

DO - 10.1016/j.jinteco.2021.103438

M3 - Article

AN - SCOPUS:85102881195

VL - 131

JO - Journal of international economics

JF - Journal of international economics

SN - 0022-1996

M1 - 103438

ER -