Research On The Influence Of Difference Of Regional Tax On The M&A Decisions

The cases of tax inversion prove that tax avoidance have become one of the motives for cross-border M&A significantly,however,at present,expansion is the most important motivation of M&A in China,but not tax revenue.In another words,tax-cost minimization is not the main factor in M&A.But in the process of economic development,preferential tax policies play an important role on regulating the imbalance of regional economic development and narrowing the gap between rich and poor regions,they also provide tax-saving space for firms at the micro perspective.While actions taken by the firms according to the relevant policy will reflect the execution effect of tax policy on macro perspective,influencing the direction of economic development.Based on this,the key problem of this paper is that:whether the differences of regional tax can significantly affect the M&A decision making?To be specific,this study tries to address the three questions below:(1)Does the tax avoidance increase the probability of M&A behaviors?(2)Whether the tax difference is the impact factor of firm's inter-province decision?(3)Furthermore,under the condition of the regional economic development and government intervention,what is the relationship between the differences of regional tax and M&A decision?This paper builds theoretical framework and hypotheses based on merger synergies,transaction cost theory.To verify the above problems,this paper conducts the empirical tests based on Logit model using listed domestic companies merging unlisted companies between 2009-2015 as samples.I find that:(1)Tax avoidance will increase the probability of M&A behaviors.(2)Tax difference is the significant impact factor of firm's inter-province behaviors.Compared with diversified M&A,integrating M&A can enhance the internal connection between tax differences and decision-making of cross-regional M&A.(3)The impact of tax differences on the firm's inter-province behaviors will decrease with the local economic development increasing in target firms.The influence of tax differences on inter-province M&A decision is different between local state-owned enterprises and private enterprises.Compared to prior studies,the significances of this study are that:(1)Deepen mechanism of the impact of preferential tax policy on enterprise M&A decision and provide the revelation about benefits and risks for sellers and buyers which helps enterprises get preferential tax through M&A.(2)According to our country's economic situation,the paper expands the research of the impact of regional-tax differences on M&A decision and explores the mechanism of M&A behaviors.(3)The results help correct the influence of the local government intervention on inter-regional capital mobility and promote the balanced development of regional economy.The paper also studies a case and provides evidence for research conclusion from practice perspective.