No abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-Technical SummaryThe United States (U.S.) is the last major economy to impose repatriation taxes on international FDI activities. If earnings from foreign subsidiaries are repatriated, the U.S. taxes the dividend at the domestic corporate tax rate of 35 % (plus state taxes), while granting a tax credit for foreign taxes already paid on the prots underlying the dividends (tax credit system). In contrast, all other important economies refrain from imposing such taxes (exemption system).Repatriation taxes to be paid on a target's prots following international mergers and acquisitions reduce the discounted future cash ows to the investor, which results in a lower valuation of the target and a lower bid price compared to an identical investor from an exemption country. Investors from the U.S. should thus less frequently succeed in acquiring targets. In this paper, we empirically investigate if a foreign tax credit system indeed impedes foreign acquisitions and quantify the implied loss in eciency.In 2009, the U.K. and Japan switched from credit to exemption. This is the rst time that two major capital exporting economies fundamentally changed their international taxation regimes, which provides us with a very promising quasi-natural experiment to identify the eect of repatriation taxes on international mergers and acquisitions.We analyze a large sample of cross-border mergers and acquisitions with acquirers from 20 OECD member states in the period from 2004 to 2010. For every target rm, we estimate the probability to observe an acquirer from each of the eventual acquirercountries in order to infer how the probability to observe an acquirer from the U.K. and Japan changed due to the introduction of the exemption system.We nd empirical evidence for repatriation taxes reducing the competitiveness of investors from tax credit countries in the international market for corporate control. The economic importance of this eect depends on the level of the domestic prot tax rate in place. The larger the domestic prot tax rate, the larger the repatriation taxes due.Since the Japanese prot tax rate (40.69 %) in 2009 is higher than the U.K. prot tax rate (28 %), the reform eect is more pronounced for Japan than for the U.K. We estimate the Japanese 2009 abolishment of the tax credit system to have increased the number of international mergers and acquisitions with a Japanese acquirer by 31.9 %. The estimated eect for the U.K. is only 3.9 %. We nally simulate a U.S. switch from...

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-Technical SummaryAs of 2008, Germany has severely changed its thin capitalization rule by introducing the so-called interest barrier. This new rule aims at prohibiting tax avoidance of multinational rms by means of cross-border internal loans. For reasons of non-discrimination, the rule is, however, equally attributable on the national level and it is applicable to both internal and external debt. Since its beginning, the German interest barrier has had a very poor reputation as it was believed to distort nancing decisions and hereby harm production eciency.Four years after its introduction, the time has come to empirically evaluate the interest barrier. In this paper, we trace to what extent the interest barrier impacted rms' nancing decisions. We distinguish between national and multinational rms as well as between the eects on internal debt to assets and external debt to assets.Thin capitalization rules prevent rms from deducting excessive interest expenses from their tax base. Before 2008, the interest on internal debt going beyond 1.5 times the equity of the respective shareholder was not deductible. As of 2008, interest payments exceeding the interest earnings are generally only deductible at the amount of 30% of EBITDA once the exemption limit of an initial EUR 1 million is exceeded. In our empirical setup, we identify rms which would have been aected by the new interest barrier, had it already been in place in the years 2005 to 2007, i.e. before its actual coming into force. Then we analyze empirically how these rms adjusted their debt to assets ratios and their net interest payments as compared to the control group.Our regressions show that the interest barrier drove rms to lower their debt to assets ratios and their net interest payments. Opposing its original intention, it seems to be, however, also the national rms which adjusted their capital structure and it was external rather than internal debt which was reduced. Therefore, we conclude that the interest barrier does indeed aect nancing decisions, but predominantly not in the intended way and not of the intended rms. In sensitivity analyses, we examine highly leveraged and low protable rms, which are likely to be subject to the interest barrier. The results suggest a debt-reducing interest barrier eect for these companies as well.Our empirical evidence does not provide a positive evaluation of the new interest barrier. The legislator might have focused too much on the task of counteracting exc...

No abstract