ABSTRACT

Financial and accounting professionals, the IRS and the legal community, continually deliberate the value of a business based on its legal structure – most often comparing the value of a C-Corporation to Pass-Through Entities, such as S-Corporations. Despite the continued deliberations and various court rulings, the cleavages of thought have not converged on a single hypothesis of value. We provide an empirical analysis on M&A transaction data that spans over a nearly two-decade time period. Specifically, we conduct multiple anova tests, and programmatic matching analysis of nearly identical Passthrough and C-Corporation transactions. When industry groupings are added, the results corroborate the premise that there exists no S-Corporation premium in the observed dataset.