Ownership Efficiency and Tax Advantages: The Case of Private Equity Buyouts

1. Person: Norbäck, Pehr-Johan
Weitere Personen: Persson, Lars; Tåg, Joacim
Format: Online-Artikel
Sprache: English
Veröffentlicht: Research Institute of Industrial Economics (IFN) 2010
Serien: IFN Working Paper
Schlagworte: Kapitalertragsteuer
Private Equity
Capital income tax
Corporate taxation
Private equity
Online Zugang: https://www.econstor.eu/bitstream/10419/81463/1/wp841.pdf
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Details: Commentators on the private equity industry often claim that favorable tax treatment gives private equity firms advantages in the market for corporate control. But we show that tax advantages do not affect the equilibrium ownership of corporate assets when acquisition costs are fully deductible since buyers' valuations of assets are then independent of taxes. However, tax advantages are of importance under limited bidding competition, limited deductibility and in the presence of oligopolistic externalities in the product market. We also show that from an efficiency perspective, there are too many acquisitions in a double taxation system because acquisitions create deductions for buyers that are not available to sellers.

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