Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 02/2017: Taxes and the Location of Targets

Wiji Arulampalam (), Michael Devereux () and Federica Liberini
Additional contact information
Wiji Arulampalam: Department of Economics, University og Warwick, Postal: University of Warwick, Coventry CV4 7AL (UK)
Michael Devereux: Centre for Business Taxation, University of Oxford, Postal: University of Oxford,, Park End Street,, Oxford,, OX1 1HP,, UK
Federica Liberini: Economic Institute, ETH Zürich, Postal: Leonhardstrasse 21, 8092 Zürich , Switzerland,

Abstract: We use firm-level data to investigate the impact of taxes on the international location of targets in M&A allowing for heterogeneous responses by companies. The statutory tax rate in the target country is found to have a negative impact on the probability of an acquisition in that country. In addition, the estimated size of the effect is found to depend on whether (i) acquirer is a domestic or a multinational enterprise; (ii) the acquisition is domestic or cross-border; and (iii) the acquirer's country has a worldwide or territorial tax system

Keywords: Multinational enterprises; cross-border expansion; target choice; corporation income tax; mixed logit

JEL-codes: C25; G34; H25; H32

47 pages, February 28, 2017

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