Escape from the USA: Government Debt-to-GDP Ratio, Country Tax Competitiveness, and U.S.-OECD Cross-border Acquisitions
2016
Statutory tax rates of a country do not reflect a country’s true tax competitiveness, we propose
and show that government debt to GDP ratio (GOVDEBT) of a country is a better proxy for
its tax competitiveness. Using a comprehensive sample of 1,884 completed cross-border
acquisition transactions from the U.S. to other OECD countries, we document that the U.S.-
target country GOVDEBT difference is significantly and positively related to both deal
announcement return and post-deal tax saving of the acquirer. The GOVDEBT difference is
also significantly and positively related to U.S.-target country deal flow. The findings remain
robust when we control for the potential endogeneity of GOVDEBT difference. Our findings
strongly suggest that tax avoidance is an important driver of U.S.-OECD cross-border deal
flow and it increases shareholder wealth for U.S. acquirers.
Keywords:
- Correction
- Source
- Cite
- Save
- Machine Reading By IdeaReader
0
References
0
Citations
NaN
KQI