The Inital Effect of U.S. Tax Reform on Foreign Acquisitions

Amberger, Harald J. and Robinson, Leslie (2021) The Inital Effect of U.S. Tax Reform on Foreign Acquisitions. WU International Taxation Research Paper Series, 2020-06. WU Vienna University of Economics and Business, Universität Wien, Vienna.

[img]
Preview
Text
SSRN-id3612783.pdf

Download (1MB) | Preview

Abstract

The Tax Cuts and Jobs Act (TCJA) of 2017 marked a significant change in U.S. domestic and international tax policy, altering incentives for U.S. firms to own foreign assets. We examine the initial response of U.S. firms’ foreign acquisition patterns to the TCJA’s key reform provisions. We find a significant overall decrease in the probability that a foreign target is acquired by a U.S. firm after the reform, suggesting that the net effect of the TCJA was to reduce investment abroad. Cross-sectional variation across target and acquirer characteristics points to the TCJA’s Global Intangible Low-Taxed Income (GILTI) regime and the elimination of the repatriation tax as playing a critical role in influencing cross-border acquisitions by U.S. firms. Specifically, U.S. acquirers with little foreign presence prior to the TCJA are more likely to acquire a foreign target, while U.S. acquirers are less likely to acquire targets in low-tax countries. Results from our empirical analyses are consistent with the TCJA prompting fewer but more value-enhancing, less tax- motivated, foreign M&A deals by U.S. firms.

Item Type: Paper
Additional Information: Editors: Eva Eberhartinger, Michael Lang, Rupert Sausgruber and Martin Zagler (Vienna University of Economics and Business), and Erich Kirchler (University of Vienna)
Keywords: TCJA, acquisitions, tax reform, repatriation taxes, M&A, international tax
Classification Codes: JEL Classification: H25, H20, G34
Depositing User: ePub Administrator
Date Deposited: 02 Mar 2021 13:46
Last Modified: 05 Nov 2021 15:25
Related URLs:
URI: https://epub.wu.ac.at/id/eprint/8024

Actions

View Item View Item

Downloads

Downloads per month over past year

View more statistics