International taxation and productivity effects of M&As

Todtenhaupt, Maximilian and Voget, Johannes (2021): International taxation and productivity effects of M&As. In: Journal of International Economics, Vol. 131, 103438

Abstract

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. (C) 2021 Elsevier B.V. All rights reserved.

• Item Type: Journal article
• Faculties: Economics
• Subjects: 300 Social sciences > 330 Economics
• ISSN: 0022-1996
• Language: English