Essays on unusual tax strategies

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University of Alabama Libraries

In the first essay, we examine corporate inversions, which occur when companies leave the United States to save on their taxes. We gather a unique sample of 80 corporate inversion announcements to explore what drives the decision to invert. We find no evidence that the firms that choose to invert have abnormally high tax burdens, instead we find evidence of ``tax aggressive'' behavior even before these companies invert. We also find evidence that inversions are more likely in highly competitive industries, suggesting that competitive pressures push companies towards inversions. Furthermore, we find evidence that certain board characteristics affect the probability that a company will invert. Finally, we provide evidence that inverters can be harmed by political speech aimed at them. In the second essay, we examine companies that fail to utilize the tax benefits of debt. In particular, we look at how the stock market evaluates these companies. We find that despite the fact that these companies are ignoring the tax benefits of debt they earn a significant premium in the market. We also find that at least some of this excess return comes from periods with high interest rates, when the cost of debt is higher.

Electronic Thesis or Dissertation
Finance, Accounting