'Looking Through' Corporate Expatriations for Buried Intangibles
University of Chicago
September 1, 2013
Primary Job Talk Paper, Forthcoming
U of Chicago, Public Law Working Paper No. 445
Lack of market response to costly signaling is by no means unheard of, especially in the presence of information asymmetries. Nonetheless, the lack of price response to corporate inversion announcements represents a puzzle, given the abnormal returns 200 percent above the S&P average in the years following the inversion transaction. This paper tests two hypotheses. First, inverting companies exhibit statistically significant excess returns as compared to the market and, second, these returns were due in large part to growth in intangibles in low-tax foreign jurisdictions. I argue that these corporate inversion transactions amount to disguised transfers of high-value “buried” intangibles that have exploited a gap in the international tax rules. Moreover, these transfers have eluded and will continue to elude the remedies prescribed by Congress to ensure full taxation of gain until a look-through rule is included to support the commensurate with income standard governing related-party transfers of intangibles.
Number of Pages in PDF File: 51
Keywords: corporate taxation, international taxation, corporate inversion, multinational, tax haven, commensurate with income, Fama-French, firm value, tax avoidance, asset allocation, efficient markets, stock priceworking papers series
Date posted: August 15, 2013 ; Last revised: November 20, 2013
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