Abstract
Capital gains taxation distorts the market for corporate control by imposing a cost on selling shareholders in acquisitions. This lock-in effect increases premiums required for deal completion preventing some M&As from taking place at all. We estimate the effect of capital gains taxation on the quantity of realized M&A deals and compute the deadweight loss related to taxing these transactions. We find that a one percentage point increase in the capital gains tax rate reduces acquisition activity by around 1% annually. For the United States, this implies unrealized synergy gains of $9.3 billion each year due to capital gains taxes. (c) 2020 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license. (http://creativecommons.org/licenses/by/4.0/ )
Item Type: | Journal article |
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Faculties: | Economics |
Subjects: | 300 Social sciences > 330 Economics |
ISSN: | 0014-2921 |
Language: | English |
Item ID: | 84733 |
Date Deposited: | 25. Jan 2022, 09:11 |
Last Modified: | 25. Jan 2022, 09:11 |