The value of a loss: The impact of restricting tax loss transfers

Anna Bührle, Elisa Casi-Eberhard, Barbara Stage and Johannes Voget

No 23-037, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We study the economic consequences of anti-loss trafficking rules, which disallow the use of loss carry-forwards as tax shield after a substantial ownership change. Using staggered changes to these rules, we find that limiting the transfer of tax losses reduces the number of M&As with loss-making targets by 22%. We further observe decreases in birth and survival rates of young companies in response to stricter regulations and vice versa. Tightening (loosening) anti-loss trafficking rules impairs (increases) return on assets, especially for R&D-intensive firms, and stricter rules lead to a decrease in successful patent applications.

Keywords: Mergers and acquisitions; anti-loss trafficking rules; taxes; market entry; market exit; productivity; innovation (search for similar items in EconPapers)
JEL-codes: G34 G38 H25 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:279548

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