Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282551 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10863
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We study the relationship between corporate income taxes and mergers and acquisitions (M&As). To this end, we compile and deploy a dataset consisting of all cross-border and domestic M&A deals for 118 source (acquirer) and 122 destination (target) countries and 84 sectors over the period 1995-2019. From a methodological perspective, we implement leading methods from the empirical gravity literature on trade, foreign direct investment, and migration, and we demonstrate their importance for estimating the impact of corporate income taxes on cross-border versus domestic M&A activity. Our main finding is that a one percentage point increase in target country corporate income tax rates decreases the number of cross-border acquisitions by about 0.8 percent relative to domestic M&As. This result is robust to various sensitivity checks and is comparable to previously published estimates. Nevertheless, our stepwise estimation strategy exemplifies the importance of individual empirical refinements. These should serve as the basis for future work investigating the effects of taxation on bilateral flows.
Subjects: 
corporate income taxes
mergers and acquisitions
gravity methods
JEL: 
F10
F14
F21
F23
H25
H87
Document Type: 
Working Paper
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