Taxation of shareholder capital gains and the choice of payment method in takeovers

Institute of Chartered Accountants in England and Wales
Publication Type:
Journal Article
Accounting and Business Research, 2008, 38 (4), pp. 331 - 350
Issue Date:
Full metadata record
Files in This Item:
Filename Description Size
Thumbnail2008003102OK.pdf262.12 kB
Adobe PDF
From December 1999, shareholders who disposed of shares in Australian takeovers in exchange for scrip could elect to defer capital gains taxation until the disposal of the shares received. We investigate payment method choice by acquiring firms before and after this regulatory change to assess whether target shareholder capital gains tax liabilities became an important factor considered in choosing the form of payment. The results show that, subsequent to the regulatory change, there is a significantly higher probability that equity will be offered as consideration where target shareholder capital gains are greater. This finding confirms the importance of shareholder level taxation in explaining corporate acquisition structure and adds to previous European and US evidence on factors associated with payment method choice in takeovers.
Please use this identifier to cite or link to this item: