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Corporate Inversions: Going beyond Tax Incentives

Author

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  • Burcin Col
  • Rose Liao
  • Stefan Zeume

Abstract

We study tax and nontax incentives for corporate inversions in a hand-collected data set 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 2 of 5 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.Received December 6, 2018; Editorial decision August 12, 2019 by Editor Andrew Ellul.

Suggested Citation

  • Burcin Col & Rose Liao & Stefan Zeume, 2020. "Corporate Inversions: Going beyond Tax Incentives," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 9(1), pages 165-206.
    • Handle: RePEc:oup:rcorpf:v:9:y:2020:i:1:p:165-206.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfz007
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    Cited by:

    1. Robinson Reyes-Peña & Arun Upadhyay & Arun Kumaraswamy, 2023. "Foreign competitive pressure and inversions by U.S. multinational enterprises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(5), pages 829-851, July.
    2. Cortes, Felipe & Gomes, Armando & Gopalan, Radhakrishnan, 2021. "Corporate Inversions and Governance," Journal of Financial Intermediation, Elsevier, vol. 47(C).

    More about this item

    Keywords

    G34; H26;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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