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International Taxation and the Direction and Volume of Cross-Border M&As
Article first published online: 20 MAY 2009
DOI: 10.1111/j.1540-6261.2009.01463.x
© 2009 The American Finance Association
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How to Cite
HUIZINGA, H. P. and VOGET, J. (2009), International Taxation and the Direction and Volume of Cross-Border M&As. The Journal of Finance, 64: 1217–1249. doi: 10.1111/j.1540-6261.2009.01463.x
Publication History
- Issue published online: 20 MAY 2009
- Article first published online: 20 MAY 2009
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ABSTRACT
We show that the parent-subsidiary structure of multinational firms created by cross-border mergers and acquisitions is affected by the prospect of international double taxation. Specifically, the likelihood of parent firm location in a country following a cross-border takeover is reduced by high international double taxation of foreign-source income. At the same time, countries with high international double taxation attract smaller numbers of parent firms. A unilateral elimination of worldwide taxation by the United States is simulated to increase the proportion of parent firms locating in the United States following cross-border mergers and acquisitions from 53% to 58%.