Corporate Inversions: Going Beyond Tax Incentives

58 Pages Posted: 20 Mar 2016 Last revised: 27 Aug 2019

See all articles by Burcin Col

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 Illinois at Urbana-Champaign

Date Written: June 27, 2019

Abstract

We study tax and non-tax incentives for corporate inversions in a hand-collected dataset of 691 inversions out of 11 home countries into 45 host destinations over the 1996-2013 period. Even though lower tax rates generally attract inversions, only two in five firms invert into tax havens and two thirds of firms invert into host destinations with lower statutory tax rates than those faced at home. Moreover, firms invert to geographically close destinations with similar governance standards. Using staggered country-pair level policy changes as experiments, we find that host-country governance 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 (June 27, 2019). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 529/2017; Pace University Finance Research Paper No. 2016/05. 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 Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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