Corporate inversions and economic performance

Nirupama S. Rao

Research output: Contribution to journalReview article

Abstract

This paper assesses the economic factors associated with corporate inversions, including the 48 inversions that have occurred since the analysis of Desai and Hines (2002). The analysis presented here is observational, not causal, as it examines how the business activities of firms that chose to invert changed after expatriation. In addition to statistically assessing the equity market’s reaction to inversion announcements, this paper examines how firms alter their patterns of employment and investment after inversion. In particular, the paper follows how the foreign shares of an inverting firm’s employment and investment change following inversion, relative to comparable non-inverting firms. The behavior of inverting firms following expatriation is assessed going back to 1980 as well as only after the 2004 policy change, which made expatriation through merger with a foreign firm with substantive foreign business activities more attractive. The results suggest that inverting firms have higher shares of their employees and capital expenditures located abroad after inversion relative to changes experienced by similar non-inverting firms. Further, these increases are not attributable to one-time changes due to the inclusion of a new foreign partner’s existing workforce and ongoing investments; foreign shares of employment and investment are higher two or more years after inversion relative to the first year after inversion when any one-time increases would occur.

Original languageEnglish (US)
Pages (from-to)1073-1098
Number of pages26
JournalNational Tax Journal
Volume68
Issue number4
DOIs
StatePublished - Dec 1 2015

Fingerprint

Economic performance
Corporate performance
Expatriation
Business activity
Capital expenditures
Mergers
Workforce
Market reaction
Time change
Equity markets
Foreign firms
Inclusion
Policy change
Economic factors
Employees
Announcement

Keywords

  • Corporate inversion
  • Offshoring

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Corporate inversions and economic performance. / Rao, Nirupama S.

In: National Tax Journal, Vol. 68, No. 4, 01.12.2015, p. 1073-1098.

Research output: Contribution to journalReview article

Rao, Nirupama S. / Corporate inversions and economic performance. In: National Tax Journal. 2015 ; Vol. 68, No. 4. pp. 1073-1098.
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