Capital gains taxation and shareholder wealth in takeovers

Abstract

Before December 1999, the capital gains of shareholders who sold their shares into Australian takeovers have been taxable irrespective of payment method. Subsequently, shareholders can elect to rollover capital gains in equity takeovers. We examine the effect of this change on the association between target shareholder capital gains and bidder and target firm shareholder wealth. The results indicate that prior to the regulatory change, cash consideration results in higher target shareholder returns for non-taxation reasons. After the introduction of capital gains tax rollover relief, we find that target and acquiring firm shareholders earn lower returns when cash consideration is offered to shareholders with greater capital gains. Copyright (c) The Authors. Journal compilation (c) 2009 AFAANZ.

Is non-executive directors’ pay or industry expertise related to takeover premiums, abnormal returns and offer price revisions?

“…2 This contention is built on the assumption that the compensation which NEDs receive from different firms drives how they allocate their time and monitoring activities. 3 We test our contention in the M&A context because M&As represent a significant capital expenditure and are often value decreasing for bidding firm shareholders (e.g., Moeller et al, 2004;Offenburg, 2009;Bugeja and Da Silva Rosa, 2010) indicating that enhanced board monitoring is required at the time of conducting an M&A.…”

Determinants of the levels and changes in non‐executive director compensation

“…The market‐to‐book measure has also been used in other studies as a measure of overvaluation (Bugeja and da Silva Rosa, ) and conservatism (Wang et al ., ) and may also indicate that the firm has large off balance sheet intangible assets (Ramanna, ).…”

CEO Relative Compensation, Takeover Premium and Bidder Performance in Australia: Efficient Contracting or Managerial Power?

“…Bugeja and Loyeung (2017) explore the association between takeover premium, accounting for business combination, IFRS adoption and CEO compensation structure. Regarding short-term performance of acquires, Walter (1984), Bugeja and Da Silva Rosa (2010) and Chan and Emanuel (2011) reveal negative announcement returns while Bishop et al (1987), Simmonds (2004), Christopher and Zicheng (2008), Porter and Singh (2010), Shams et al (2013) and Bugeja, Matolcsy, Mehdi, et al (2017) confirm positive market reaction. Similarly, Walter (1984) suggest that takeovers are value enhancing for bidders in long-term while Da Silva Rosa and Walter (2004), Chan and Emanuel (2011) and Duong and Izan (2012) show evidence of value-decreasing deals.…”

“…HostileTakeover is a dummy variable that takes the value of one if the bid attitude is hostile, and zero otherwise. 9 Whether the bid attitude is hostile or friendly has been cited to result in the cost of acquisitions (Franks and Mayer, 1996;Moeller et al, 2004) It can be explained that a reject recommendation could increase higher the possibility of a price rise by the acquirers (Bugeja and Da Silva Rosa, 2010).…”