The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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An Empirical Study of the Consequences of U.S. Tax Rules for International Acquisitions by U.S. Firms
Published: 12/01/1994 | DOI: 10.1111/j.1540-6261.1994.tb04786.x
GIL B. MANZON, DAVID J. SHARP, NICKOLAOS G. TRAVLOS
This article examines the effect of tax factors on the equity values of U.S. multinational corporations making foreign acquisitions. Abnormal stock returns are found to be related to a tax variable that captures differences in the international tax status of acquiring firms but not related to a naive tax variable that captures differences between tax rates in target countries and the United States. Our evidence suggests that aggregate intercountry differentials in after‐tax returns are competed away, while firm‐specific, tax‐related advantages (or disadvantages) are reflected in abnormal returns around the announcement date of the acquisition.