Corporate Inversions: Going Beyond Tax Incentives

49 Pages Posted: 20 Mar 2016 Last revised: 13 Apr 2018

Burcin Col

Pace University-Lubin School of Business

Rose C. Liao

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics

Stefan Zeume

University of Michigan, Stephen M. Ross School of Business

Date Written: April 2018

Abstract

We identify new stylized facts about corporate inversions. Our analysis is based on a hand-collected dataset of 691 inversions out of 11 home countries into 45 host destinations over the 1996-2013 period. First, the majority of these inversions are conducted by non-U.S.-based firms. Second, inversions are not entirely tax-driven. Even though firms are more likely to invert to countries with lower tax rates, 62% of sample inversions are into non-tax havens and among these, half are into host destinations with higher statutory tax rates than those faced at home. Third, governance factors are important determinants of inversion decisions. Firms tend to invert to destinations with similar governance standards and inversion activity increases as the transparency of the host destination, specifically tax havens, improves. Overall, governance considerations may explain why not all firms invert.

Keywords: Inversions, Tax havens, Tax avoidance, Corporate governance, Cross-border flows

JEL Classification: G34, H26

Suggested Citation

Col, Burcin and Liao, Rose C. and Zeume, Stefan, Corporate Inversions: Going Beyond Tax Incentives (April 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 529/2017. Available at SSRN: https://ssrn.com/abstract=2750340 or http://dx.doi.org/10.2139/ssrn.2750340

Burcin Col

Pace University-Lubin School of Business ( email )

One Pace Plaza
New York, NY 100038
United States

Rose C. Liao (Contact Author)

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics ( email )

1 Washington Park
Newark, NJ 07102
United States

Stefan Zeume

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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