Capital gains taxation and shareholder wealth in takeovers
- Publication Type:
- Journal Article
- Accounting and Finance, 2010, 50 (2), pp. 241 - 262
- Issue Date:
Before December 1999, the capital gains of shareholders who sold their shares into Australian takeovers have been taxable irrespective of payment method. Subsequently, shareholders can elect to rollover capital gains in equity takeovers. We examine the effect of this change on the association between target shareholder capital gains and bidder and target firm shareholder wealth. The results indicate that prior to the regulatory change, cash consideration results in higher target shareholder returns for non-taxation reasons. After the introduction of capital gains tax rollover relief, we find that target and acquiring firm shareholders earn lower returns when cash consideration is offered to shareholders with greater capital gains. © The Authors. Journal compilation © 2009 AFAANZ.
Please use this identifier to cite or link to this item: