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Merger policy and tax competition: The role of foreign firm ownership

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  • Haufler, Andreas
  • Schulte, Christian

Abstract

In many situations, governments have sector-specific tax and regulation policies at their disposal to influence the market outcome after a national or an international merger has taken place. In this paper we study the implications for merger policy when countries non-cooperatively deploy production-based taxes and firms may be partly owned by foreigners. We find that when foreign firm ownership is low in the pre-merger situation, non-cooperative tax policies are more efficient after a national merger, and smaller synergy effects are needed for this type of merger to be proposed and cleared. In contrast, cross-border mergers dominate when the degree of foreign firm ownership is high initially. These results suggest a link between increasing international portfolio diversification and the rising share of cross-border mergers.

Suggested Citation

  • Haufler, Andreas & Schulte, Christian, 2011. "Merger policy and tax competition: The role of foreign firm ownership," Munich Reprints in Economics 20413, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:20413
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    Cited by:

    1. Sanjo, Yasuo, 2015. "The role of firm ownership in policy competition for foreign direct investment between asymmetric countries," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 110-121.
    2. Robert C. Schmidt & Marco Runkel, 2016. "Environmental tax competition under firm mobility and leakage," Working Papers 2015016, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    3. Siggelkow, Benjamin Florian, 2013. "Tax Competition and Double Tax Treaties with Mergers and Acquisitions," MPRA Paper 49371, University Library of Munich, Germany.
    4. Becker, Johannes & Runkel, Marco, 2013. "Corporate tax regime and international allocation of ownership," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 8-15.

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    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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