Merger policy and tax competition: The role of foreign firm ownership

Haufler, Andreas and Schulte, Christian (2011): Merger policy and tax competition: The role of foreign firm ownership. In: International Tax and Public Finance, Vol. 18, No. 2: pp. 121-145

Abstract

In many situations, governments have sector-specific tax and regulation policies at their disposal to influence the market outcome after a national or an international merger has taken place. In this paper we study the implications for merger policy when countries non-cooperatively deploy production-based taxes and firms may be partly owned by foreigners. We find that when foreign firm ownership is low in the pre-merger situation, non-cooperative tax policies are more efficient after a national merger, and smaller synergy effects are needed for this type of merger to be proposed and cleared. In contrast, cross-border mergers dominate when the degree of foreign firm ownership is high initially. These results suggest a link between increasing international portfolio diversification and the rising share of cross-border mergers.

• Item Type: Journal article
• Faculties: Economics; Economics > Chairs > Seminar for Economic Policy
• Subjects: 300 Social sciences > 330 Economics
• Language: English