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In this dissertation, I examine two related questions on whether and how tax aggressiveness of firms is associated with shareholder wealth in a new context – mergers and acquisitions (M&A). The first study investigates whether and how the tax aggressiveness of the acquirers and targets affects shareholder wealth. I present the idea of tax aggressiveness transfer whereby the acquirer’s propensity for tax planning applies to its target’s tax function after the change in ownership. I measure the degree of tax aggressiveness transfer using the relative tax aggressiveness of the acquirer and target (i.e., the difference in tax aggressiveness between the two firms). I find that acquisitions of more tax aggressive targets by less tax aggressive acquirers generate significantly lower acquisition gains. I also document weaker evidence that acquisitions of less tax aggressive targets by more tax aggressive acquirers generate higher acquisition gains. That is, the results suggest that the shareholder wealth effects of tax aggressiveness transfer are driven by the value-destroying effect of decreases in tax aggressiveness. Cross-sectional analyses reveal that the acquirer’s governance is a significant determinant of the shareholder wealth effects of tax aggressiveness transfer. Specifically, the results indicate that, when acquirers are well-governed, acquisitions of targets with lower tax aggressiveness by acquirers with higher tax aggressiveness are value-enhancing. Similarly, acquisitions of targets with higher tax aggressiveness by acquirers with lower tax aggressiveness are value-destroying. These findings are robust to various measures of tax aggressiveness. In sum, I find that tax aggressiveness transfer is a significant determinant of value creation or destruction in M&A. The second study is devoted to studying whether and how the target’s participation of tax shelters – an extreme form of tax aggressiveness – matters in acquirer’s valuation of the target firm. Using a novel dataset that identifies targets’ non-participation in tax shelters, I find that the target’s non-sheltering status is associated with a higher takeover premium, indicating that acquirers reward targets for not engaging in tax sheltering. This positive association is stronger for targets that are more opaque and for acquirers that are less tax aggressive. In addition, I find that the target’s non-sheltering status is positively associated with acquirer returns for acquirers that are weakly governed and for targets that are more opaque. Overall, my findings suggest that the target’s non-sheltering status is relevant in acquirers’ valuation of the target, and that the valuation benefits of the target’s non-participation in tax shelters are mainly accrued to the target’s own shareholders rather than to those of the acquiring firm.

This thesis investigates the monitoring effect from institutional ownership on bidder Chief Executive Officer (hereafter CEO) compensation in mergers and acquisitions (hereafter M&A) as well as the shift in compensation structure. While it is well-established in the literature that bidder CEO compensation soars significantly after conducting such transactions, the sources of the growth are left unclear. One major argument, the traditional theory, proposes that the growth derives from additional wealth created to shareholders in M&A, because according to the nature of compensation contract, CEOs’ interests are effectively aligned with shareholders’ benefits. On the other hand, scholars of managerial power theory argue that managerial power is stronger than shareholders’ oversight, so managers use M&A as a cover to expropriate wealth from shareholders. Whether the traditional theory or the managerial power theory dominates depends on the presence of optimal contract and the effectiveness of corporate governance. Institutional owners have more motivation and resources to restrict managerial behaviour than diffused owners. Thus, the change in CEO compensation following M&A and the driving factors behind the change could be different in firms with different types of ownership. After examining the 268 merger events from 266 US public non-family bidding firms from 2001 to 2005, this study finds that the magnitude of increase in CEO cash-based compensation is significantly alleviated in the presence of large institutional shareholders, and that the increase seems to be positively related to good short-term performance rather than managerial power. However, the concentrated institutional ownership does not seem to affect CEO equity-based compensation or the change in compensation structure. Besides, we do not find any significant relation between firm long-term post-acquisition performance and the market reaction to the announcement of M&A. Thus, we propose that without a reliable indication from short-term performance, large institutional shareholders could have problems in understanding the potential impact of M&A and they might adjust CEO equity-based compensation in a serial process after M&A.

In this study, a strategic thinking and planning model known as Synergy Value Index (SVI) model was developed for estimating the synergy value in MandA. The SVI (QE) from the confirmed SVI model allows quick estimation of synergy between two companies in a merger and acquisition. SVI (QE) is expressed as a percentage, which is a measurement of synergy between two companies in an MandA. This confirmed SVI model evolved from the theoretical model through a process of model building. The study took a holistic approach of understanding synergy value drivers from different schools of thought found in the literatures. A theoretical strategic thinking and planning model was developed and confirmed by expert panelists, from which a conceptual model was created. The conceptual model was tested in two case studies and modified to the preliminary model. The preliminary model was further tested in two case studies to arrive at the confirmed model. During the process of model building, the concepts of synergy value and synergy value drivers become clearer. The study found that 39 synergy value drivers are important in estimating synergy value for MandA. However, only 11 synergy value drivers need be considered for quick computation of Synergy Value Index. In addition, the study offers insight to the study of synergy in MandA. Approaching the study from various different schools of thought was significant because it contributes to a holistic understanding of the behavior of the various synergy value drivers. The study proposed a model identifying synergy value drivers that was confirmed by both expert panelists and case studies. By using the SVI as a unit of measurement of synergy, synergy value drivers of different importance can be measured relative to each other for comparison. The model allowed for a quick evaluation of synergy fit in MandA, especially when the time frame for making a good decision with minimum error during the pre-acquisition phase can be very short. In practice, the SVI model can be used with other financial evaluation tools to provide a strategic perspective of the potential merger and acquisition to the acquirer. Hence, the model can be a very useful platform for the acquirer to think and discuss internally and quantitatively in terms of SVI of the various takeover candidate companies. / Thesis (PhDBusinessandManagement)--University of South Australia, 2005.

In this study, a strategic thinking and planning model known as Synergy Value Index (SVI) model was developed for estimating the synergy value in MandA. The SVI (QE) from the confirmed SVI model allows quick estimation of synergy between two companies in a merger and acquisition. SVI (QE) is expressed as a percentage, which is a measurement of synergy between two companies in an MandA. This confirmed SVI model evolved from the theoretical model through a process of model building. The study took a holistic approach of understanding synergy value drivers from different schools of thought found in the literatures. A theoretical strategic thinking and planning model was developed and confirmed by expert panelists, from which a conceptual model was created. The conceptual model was tested in two case studies and modified to the preliminary model. The preliminary model was further tested in two case studies to arrive at the confirmed model. During the process of model building, the concepts of synergy value and synergy value drivers become clearer. The study found that 39 synergy value drivers are important in estimating synergy value for MandA. However, only 11 synergy value drivers need be considered for quick computation of Synergy Value Index. In addition, the study offers insight to the study of synergy in MandA. Approaching the study from various different schools of thought was significant because it contributes to a holistic understanding of the behavior of the various synergy value drivers. The study proposed a model identifying synergy value drivers that was confirmed by both expert panelists and case studies. By using the SVI as a unit of measurement of synergy, synergy value drivers of different importance can be measured relative to each other for comparison. The model allowed for a quick evaluation of synergy fit in MandA, especially when the time frame for making a good decision with minimum error during the pre-acquisition phase can be very short. In practice, the SVI model can be used with other financial evaluation tools to provide a strategic perspective of the potential merger and acquisition to the acquirer. Hence, the model can be a very useful platform for the acquirer to think and discuss internally and quantitatively in terms of SVI of the various takeover candidate companies. / Thesis (PhDBusinessandManagement)--University of South Australia, 2005.

Diss. Stockholm : Handelshögsk., 2003.

Zugl.: Bayreuth, Universiẗat, Diss., 2008.

Zugl.: Ulm, Univ., Diss., 2007

Zugl.: Bielefeld, Univ., Diss., 2007

Thesis (Ph.D.)--Drexel University, 2008. / Includes abstract and vita. Includes bibliographical references (leaves 185-189).