An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Martin Bugeja
University of Sydney

Raymond Da Silva Rosa
University of Western Australia

Abstract: From December 1999, shareholders that disposed of shares in Australian takeovers in exchange for scrip have been allowed to defer taxation until the disposal of the shares received. This study utilises this change to examine the role of taxation in explaining shareholder wealth and payment method choice. We find that this change increased target shareholder premiums in cash bids, but had no impact on the consideration form used by acquiring firms. The payment method choice of Australian bidders is found to be associated with acquiring firm free cash flow, institutional ownership and board composition as well as target firm size.

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