01338nam a22001817a 4500 190323b xxu||||| |||| 00| 0 eng d 0304-405X Capital gains taxation and the cost of capital: Evidence from unanticipated cross-border transfers of tax base / by Harry Huizinga, Johannes Voget & Wolf Wagner Harry Huizinga, Johannes Voget & Wolf Wagner Amsterdam Elsevier August 2018 Pages 306-328 Journal of Financial Economics 129 (2) 0304-405X Abstract In a cross-border takeover, the tax base associated with future capital gains is transferred from target shareholders to acquirer shareholders. Cross-country differences in capital gains tax rates enable us to estimate the discount in target valuation on account of future capital gains. We estimate that a 1 percentage point increase in the capital gains tax rate reduces the value of equity by around 0.3%, which suggests that the capital gains tax significantly raises firms’ cost of capital. Furthermore, we find that the implied capital gains tax burden is higher at times of high economic growth and low stock market valuation. Capital gains taxation Cost of capital International takeovers Takeover premium lcc SE 361364 361364 0 0 lcc 0 CL CL PER 2019-03-23 0 2019-03-23 00:00:00 2019-03-23 SE