Escape from the USA: Government debt-to-GDP ratio, country tax competitiveness, and US-OECD cross-border M&As

Abstract

We study how differences in target country-US tax competitiveness influence acquirers’ share price reactions to US cross-border acquisitions, the tax savings after acquisition completion, and the US cross-border acquisition deal flows. We employ two-stage least-squares regressions and use the fitted component of the government debt-to-GDP ratio difference between the US and a target country as a proxy for the target country-US tax-competitiveness difference. Using a sample of US acquisitions of targets in other OECD countries, in which around one-tenth of the target firms are publicly listed firms while the rest are private and subsidiary firms, our findings suggest that tax arbitrage (a) increases the shareholder wealth of US acquirers and (b) is likely an important driver of US-OECD cross-border acquisition deal flows.

Résumé

Nous étudions comment les différences de compétitivité fiscale entre les pays cibles et les États-Unis influencent les réactions des acquéreurs aux prix des actions face aux acquisitions transfrontalières américaines, aux économies d’impôt réalisées après la finalisation des acquisitions et aux flux d’acquisitions transfrontalières américaines. Nous utilisons des régressions par les moindres carrés en deux étapes et nous utilisons la composante ajustée de la différence de ratio dette publique/PIB entre les États-Unis et un pays cible comme un indicateur indirect de la différence de compétitivité fiscale entre le pays cible et les États-Unis. En utilisant un échantillon d’acquisitions américaines de cibles dans d’autres pays de l’OCDE, dans lesquels environ un dixième des entreprises cibles sont des sociétés cotées en bourse—les autres entreprises étant des sociétés privées et des filiales—nos résultats suggèrent que l’arbitrage fiscal (a) accroît la richesse des actionnaires des acquéreurs américains et (b) est probablement un moteur important des flux d’acquisitions transfrontalières entre les États-Unis et l’OCDE.

Resumen

Estudiamos cómo las diferencias entre la competitividad fiscal del país objetivo y la de los Estados Unidos influyen en las reacciones del precio de las acciones de los adquirentes de las adquisiciones transfronterizas de los Estados Unidos, el ahorro fiscal después de la finalización de la adquisición y los flujos del acuerdo de adquisición transfronteriza de Estados Unidos. Empleamos regresiones de mínimos cuadrados en dos etapas y utilizamos el componente ajustado de la diferencia entre la relación gobierno-deuda y PIB entre los Estados Unidos y un país objetivo como proxy de la diferencia de competitividad fiscal entre el país objetivo y los Estados Unidos. Usando una muestra de las adquisiciones de objetivos de los Estados Unidos en otros países de la OCDE, en los que cerca de una décima parte de las empresas objetivo son empresas que cotizan en bolsa, mientras que el resto son empresas privadas y subsidiarias, nuestros hallazgos sugieren que el arbitraje fiscal (a) aumenta la riqueza de los accionistas de los adquirentes de Estados Unidos, y (b) es probablemente un importante impulsor de los flujos de acuerdos de adquisición transfronterizos de Estados Unidos y la OCDE.

Resumo

Estudamos como as diferenças entre a competitividade de impostos nos EUA versus países-alvo influenciam as reações de compradores no que se refere ao preço de ações nas aquisições internacionais dos EUA, a economia fiscal após a conclusão da aquisição e os fluxos de negócios de aquisições transfronteiriças dos EUA. Empregamos regressões de mínimos quadrados em dois estágios e usamos o componente ajustado da diferença da razão dívida do governo-PIB entre os EUA e um país-alvo como uma proxy para a diferença na competitividade de impostos entre os EUA e o país-alvo. Usando uma amostra de aquisições americanas de alvos em outros países da OCDE, nos quais cerca de um décimo das empresas-alvo são listadas, enquanto as demais são empresas privadas e subsidiárias, nossas conclusões sugerem que a arbitragem tributária (a) aumenta a riqueza de acionistas adquirentes dos EUA e (b) é provavelmente um importante impulsionador de fluxos de aquisições transfronteiriças entre os EUA e a OCDE.

摘要

我们研究目标国家-美国税收竞争力的差异如何影响收购者对美国跨境收购的股价反应,收购完成后的税收节省, 以及美国跨境收购交易流量。我们采用两阶段最小二乘回归, 并使用美国与目标国家之间政府债务与GDP比率差异的拟合组件作为目标国家-美国税收竞争力差异的代表。利用美国在其它经合组织国家收购目标的样本,其中约十分之一的目标公司是上市公司, 其余公司是私营和子公司, 我们的研究结果表明, 税收套利(a)增加了美国收购者的股东财富;(b)可能是美国-经合组织国家跨境收购交易流量的一个重要的推动因素.

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ACKNOWLEDGEMENTS

We thank Lemma Senbet (the editor), Alain Verbeke (editor-in-chief), two anonymous referees, Michael Erkens, Iftekhar Hasan, Edith Leung, Bo Li, Kai Li, Bibo Liu, Sander Renes, Jochen Pierk, Jeroen Suijs, Eliza Wu, seminar participants at Erasmus University Rotterdam, La Trobe University, University of Sydney, and session participants at the 2016 Australasian Banking and Finance Conference and the 2016 Financial Research Network (FIRN) Annual Meeting for many helpful comments and suggestions.

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Accepted by Lemma Senbet, Area Editor, 28 December 2018. This article has been with the authors for four revisions.

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Gan, Y., Qiu, B. Escape from the USA: Government debt-to-GDP ratio, country tax competitiveness, and US-OECD cross-border M&As. J Int Bus Stud 50, 1156–1183 (2019). https://doi.org/10.1057/s41267-019-00216-w

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Keywords

  • government debt-to-GDP ratio
  • country tax competitiveness
  • cross-border mergers and acquisitions
  • tax avoidance
  • two-stage least-squares regressions