Long-term tax strategy and corporate acquisition payment structure: An analysis based on the book-tax tradeoff theory

Author(s)
Author(s)
He, M.
Mo, P. L. L.
Zhang, W.
Date Issued
2024
Publisher
Elsevier
Journal
Journal of Contemporary Accounting & Economics
Volume
20
Issue
3
Abstract
This study examines the relationship between corporate acquirers’ long-term tax strategy (i.e., past behavior) and their subsequent choice of an acquisition payment method (i.e., future behavior) based on a book-tax tradeoff analysis. We find that acquirers with a high (low) level of long-term tax avoidance are more likely to have cash (stock)-financed acquisitions. Political influence attenuates the significance of the above relationship. Among the acquirers who use cash-financed payment method, those who are less tax aggressive tend to include debt to finance their acquisitions, suggesting that debt and non-debt tax shields are substitutes for each other in acquisitions.
URI
DOI
SFU Affiliated Publication
Yes
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