Taxing away M&A: Capital gains taxation and acquisition activity

Maximilian Todtenhaupt, Johannes Voget, Lars Feld, Martin Ruf and Ulrich Schreiber

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: Capital gains taxation distorts the market for corporate control by imposing a cost on selling shareholders in acquisitions. This lock-in effect increases premiums required for deal completion preventing some M&As from taking place at all. We estimate the effect of capital gains taxation on the quantity of realized M&A deals and compute the deadweight loss related to taxing these transactions. We find that a one percentage point increase in the capital gains tax rate reduces acquisition activity by around 1% annually. For the United States, this implies unrealized synergy gains of $9.3 billion each year due to capital gains taxes. (c) 2020 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license. (http://creativecommons.org/licenses/by/4.0/ )

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (15)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Taxing away M&A: Capital gains taxation and acquisition activity (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:84733

Access Statistics for this paper

More papers in Munich Reprints in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().