HOW U.S. CORPORATE INVERSIONS IMPACT SHAREHOLDER VALUE
Open Access
- Author:
- MacDonald, MaryKate E
- Area of Honors:
- Finance
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Chris Muscarella, Thesis Supervisor
Dr. Brian Spangler Davis, Thesis Honors Advisor - Keywords:
- Corporate Inversion
Effective Tax Rate
Tax Haven
Merger & Acquisition - Abstract:
- This report examines how U.S. corporate tax inversion announcements impact shareholder value. A corporate tax inversion is where a corporation moves its location of residency to a new jurisdiction with a lower tax rate than that of its original location of incorporation. Corporate operations are usually continued in the location with the higher federal effective tax rate. Since the first U.S. inversion in 1983, there have been more than 75 inversions (Marples & Gravelle, 2016). There has been growing division over the issue of whether or not inversions are acceptable as a result of the U.S. tax base deteriorating. Many politicians have been searching for ways to control the number of inversions through legislation. As a result, inversion trends have been changing due to governmental regulation, international business, and public opinion. For this analysis, data is collected on 49 corporate inversions that occur from 1983 to 2016. Event studies are conducted on individual trends to determine what types of inversions create the most value. Results indicate that pharmaceutical corporations completing merger and acquisition (M&A) inversions in Ireland after 2007 are valued the most by shareholders.