Taxes, Mergers, and the Value of Limited Liability Protection: Evidence from Parent-Subsidiary Mergers in Korea
研究了韩国母子公司合并中税收对合并决策的影响，发现税收节省与合并公告回报正相关，但亏损子公司因失去有限责任保护而回报较低。
ABSTRACT I examine the effects of taxation on parent-subsidiary mergers in Korea, where tax consolidation was not allowed and, after the merger, only the parent’s pre-existing losses offset subsidiary profits. Specifically, I focus on mergers in which a parent and a wholly owned subsidiary combine into a single legal entity (a P-S merger), involving no cash transfers, ownership changes, or significant synergies. Most P-S mergers occur between profitable and loss-making firms, suggesting tax motivations. Merger announcement returns are positively associated with estimated tax savings. However, returns are lower for loss-making subsidiaries, especially without a parent debt guarantee. This reflects the loss of limited liability protection and limits on utilizing subsidiary losses. Nevertheless, positive returns may reflect expected future tax benefits if the subsidiary continues to incur losses. The results suggest that tax considerations, together with the loss of limited liability protection, play an important role in shaping parent-subsidiary structures. Data Availability: The data used in this study are available from publicly accessible sources. JEL Classifications: G34; H25; G32.