'Looking Through' Corporate Expatriations for Buried Intangibles
University of Illinois College of Business Department of Accountancy
November 17, 2013
U of Chicago, Public Law Working Paper No. 445
This paper represents the first event study of corporate expatriations since Desai and Hines (2002), and is the first study to link corporate expatriation behavior to intangibles. The paper demonstrates that corporate expatriations – whether naked inversions or redomiciliations in the context of business combinations – generate statistically and economically significant excess returns in the years following the inversion. Moreover, notwithstanding the public nature of the inversion announcement, which should be a signal of extraordinary future profits, there has historically been no price response to the signal. Their inability to send a credible signal of future profits provides corporate managers the opportunity to reorganize outside the U.S. at a reduced tax cost, if they believe that the benefits to expatriation outweigh the cost. My hypothesis is that this cost-benefit analysis results in expatriation when managers believe that they have asymmetric information as to the value of future income growth attributable to intangibles.
Number of Pages in PDF File: 39
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: July 29, 2014
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