The Motivation for Inversion

46 Pages Posted: 1 Oct 2021 Last revised: 3 Nov 2021

See all articles by Erez Levy

Erez Levy

Northwestern University - Kellogg School of Management; Tel Aviv University, Coller School of Management

Aharon R. Ofer

Northwestern University - Kellogg School of Management; Tel Aviv University - The Leon Recanati Graduate School of Business Administration

Date Written: September 29, 2021

Abstract

It is obvious who loses from inversion of a U.S firm - the U.S government, which loses future tax income. However, the complementary question- who benefits from inversion and consequently why do inversions occur, does not have a clear answer. We examine the effect of inversion on four entities: The shareholders, bondholders and executives of the inverted firm; and Shareholders of the target firm (if the inversion was done through merger inversion). Our findings indicate that the executives benefit from inversion while the stakeholders of the inverted firm do not. In addition, we find that the shareholders of the target firms benefit from inversion. Considering the size of the firms, the implications on the U.S tax revenues and that previous regulations attempts did not deter inversion transactions, we believe that these findings have policy implications.

Keywords: Corporate governance, Value of firms, Government and Regulations, mergers and Acquisions, Payout Policy

JEL Classification: G32, G34, G35, G38

Suggested Citation

Levy, Erez and Levy, Erez and Ofer, Aharon R., The Motivation for Inversion (September 29, 2021). Available at SSRN: https://ssrn.com/abstract=3933237 or http://dx.doi.org/10.2139/ssrn.3933237

Erez Levy (Contact Author)

Tel Aviv University, Coller School of Management ( email )

Tel Aviv
Israel

Northwestern University - Kellogg School of Management ( email )

2211 campus drive
Evanston, IL 60208
United States

Aharon R. Ofer

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-3562 (Phone)
847-491-5719 (Fax)

Tel Aviv University - The Leon Recanati Graduate School of Business Administration

P.O. Box 39010
Ramat Aviv Tel Aviv 69972, 69978
Israel

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