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The Creation of Shareholder Value in the Fourth Wave of Corporate Inversions in the U.S.

  • In a globalized economy, tax competition between countries plays an increasingly important role. Due to the unique features of the U.S. tax system, corporate inversions from the United States are an example of how multinational corporations can avoid taxes. The present paper analyses whether shareholder value is created in the fourth wave of corporate inversions in the U.S. in order to show if this tax avoidance scheme is rewarded by the market. Shareholder value creation is calculated by using the event study methodology. Whereas corporate inversions of waves one to three showed mixed or insignificant negative market reactions in the short term (Cloyd et al., 2003; Desai and Hines Jr., 2002), reactions to the fourth waves are different. The results of this paper demonstrate that the market reactions to an inversion announcement of the fourth wave on average show a statistically significant positive cumulative average abnormal return (CAAR) of 6.78% in a five-day window. It can therefore be concluded that shareholder value is created. Important for the creation of shareholder value are the structure of the inversion a company chooses and its industrial sector: A corporate inversion structured as a merger with business activities in the pharmaceutical and healthcare sector exhibit significant amounts of shareholder value creation. Therefore, legal loopholes have to be amended or the tax system adjusted in order to sustainably prevent the outflow of companies and, hence, tax income.

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Metadaten
Author:Lucas Harbig
Referee:Avo Schönbohm
Advisor:Wojciech Stiller
Document Type:Bachelor Thesis
Language:English
Date of first Publication:2020/02/06
Publishing Institution:Hochschulbibliothek HWR Berlin
Granting Institution:Hochschule für Wirtschaft und Recht Berlin
Date of final exam:2018/02/19
Release Date:2020/02/06
Page Number:64
Institutes:FB I - Wirtschaftswissenschaften / International Business Management (IBMAN) B.A.
Licence (German):License LogoUrheberrechtsschutz