The Effect of Cross-Border Acquisition and Tax Avoidance on Post Acquisition Firm Value

This study aims to examine the impact of cross-border acquisitions (CBA) and tax avoidance on the firm value of an acquirer in the Asian region. This study also examines whether tax avoidance affects the relationship between CBA and firm value. The research covers 567 acquisitions by Asian firms during the period 2012–2014, with 1,117 firm-year observations. Multiple regression was used for data analysis. The study uses three measurements of tax avoidance, namely effective tax rate differences (ETR_D), book-tax differences (BTD) and residual book-tax differences (RBTD). It was found that CBAs destroy the acquirer’s firm value, which is consistent with the managerialism and hubris hypotheses. The effect of tax avoidance on post-acquisition firm value is positively significant. The results also show that tax avoidance strengthens or increases the negative effect of CBA on post-acquisition firm value. This study has implications for companies that want to make acquisitions and make aspects of taxation a consideration in making acquisition decisions.