Does U.S. foreign earnings lockout advantage foreign acquirers?

Andrew Bird, Alexander Edwards and Terry Shevlin

Journal of Accounting and Economics, 2017, vol. 64, issue 1, 150-166

Abstract: We hypothesize and find evidence consistent with foreign firms being tax-favored acquirers of U.S. targets with greater locked-out earnings because they can avoid the U.S. tax on repatriations. This effect is economically significant; a standard deviation increase in lockout is associated with a 12% relative increase in the likelihood that an acquirer is foreign. We also find evidence that foreign acquirers of the target firms are more likely to be residents of countries that use territorial tax systems, as the tax advantages for a foreign firm acquiring a U.S. target with locked-out earnings are even greater for these acquirers.

Keywords: Taxes; International; Acquisitions (search for similar items in EconPapers)
JEL-codes: F23 G34 H25 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:64:y:2017:i:1:p:150-166

DOI: 10.1016/j.jacceco.2017.06.004

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