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Reassessing the Effects of Corporate Income Taxes on Mergers and Acquisitions Using Empirical Advances in the Gravity Literature
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Reassessing the Effects of Corporate Income Taxes on Mergers and Acquisitions Using Empirical Advances in the Gravity Literature

Sebastien Bradley, Federico Carril-Caccia and Yoto V. Yotov
National tax journal, v 78(4), pp 821-861
01 Dec 2025
DOI: https://doi.org/10.1086/736219
Featured in Collection :   UN Sustainable Development Goals @ Drexel

Abstract

Business & Economics Business, Finance Economics Social Sciences
We study the relationship between corporate income tax (CIT) rates and mergers and acquisitions (M&As). To this end, we compile a new data set of cross-border and domestic M&A deals for more than 100 countries and 84 sectors, 1995-2019. We implement leading un(der)utilized methods from the empirical gravity literature following a stepwise estimation strategy, which exemplifies the importance of individual empirical refinements. A 1 percentage point increase in target CIT rates decreases the number of cross-border acquisitions by 0.8 percent relative to domestic M&As. The proposed methods should apply more broadly to work investigating the effects of taxation on bilateral flows.

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UN Sustainable Development Goals (SDGs)

This publication has contributed to the advancement of the following goals:

#17 Partnerships for the Goals
#1 No Poverty
#10 Reduced Inequalities

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Collaboration types
Domestic collaboration
International collaboration
Web of Science research areas
Business, Finance
Economics
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