New article by Todtenhaupt

13 October 2020 16:31

(updated: 14 October 2020 16:31)

New article by Todtenhaupt

The article "Taxing away M&A: Capital gains taxation and acquisition activity" has been published in European Economic Review.

European Economic Review is on level 3 in the ABS Academic Journal Guide.

Todtenhaupt, Maximilian Johannes Voget, Lars P. Feld, Martin Ruf and Ulrich Schreiber: Taxing away M&A: Capital gains taxation and acquisition activity, European Economic Review, Online 23.06.2020.


Capital gains taxation distorts the market for corporate control by imposing a cost on selling shareholders in acquisitions. This lock-in effect increases premiums required for deal completion preventing some M&As from taking place at all. We estimate the effect of capital gains taxation on the quantity of realized M&A deals and compute the deadweight loss related to taxing these transactions.

We find that a one percentage point increase in the capital gains tax rate reduces acquisition activity by around 1% annually. For the United States, this implies unrealized synergy gains of $9.3 billion each year due to capital gains taxes.