The purpose of this project is to investigate the influence of tax incentives on the financial structures of acquisitions by multinational entities (MNE). In case of mergers and acquisitions (M&As), purchase prices are often financed by high amounts of debt. From a tax perspective, it is beneficial to assign the loans to an entity in a high tax country. However, the tax shield from interest deductions has to be matched with taxable income. Therefore, it is often advantageous to place the debt at a holding in the country of the target firm. This strategy is known as debt push down (DPD). We will investigate the potential tax influence on financial structures associated with M&As of German MNEs. The analysis will be separated in two steps. First, we will investigate, whether financial considerations and associated tax benefits determine group and in particular holding structures. As a second step, we will analyze the influence of taxes on capital structure choices and particularly account for DPD strategies. The firm data will be obtained from the MiDi database, which is provided by the Deutsche Bundesbank.
01.04.2017 - 30.11.2017