Shareholder Taxes in Acquisition Premiums: The Effect of Capital Gains Taxation Academic Article uri icon


  • We exploit cross-temporal differences in capital gains tax rates to test whether shareholder-level capital gains taxes are associated with higher acquisition premiums for taxable acquisitions. We model acquisition premiums as a function of proxies for the capital gains taxes of target shareholders, taxability of the acquisition, and tax status of the price-setting shareholder as represented by the level of target institutional ownership. Consistent with a lock-in effect for acquisition premiums, results suggest a unique positive association between shareholder capital gains taxes for individual investors and acquisition premiums for taxable acquisitions, which is mitigated by target institutional ownership.

published proceedings

  • The Journal of Finance

author list (cited authors)

  • Ayers, B. C., Lefanowicz, C. E., & Robinson, J. R.

citation count

  • 126

complete list of authors

  • Ayers, Benjamin C||Lefanowicz, Craig E||Robinson, John R

publication date

  • December 2003