Firm value effects of Treasury Regulations: Evidence from corporate tax inversions

Ph.D. Candidate Amanda Marino of the Accounting Department will be defending her Dissertation titled, “Firm value effects of Treasury Regulations: Evidence from corporate tax inversions” on 04/28/2021.

The time and location of her dissertation defense is 12:00pm EST – 1:30pm EST, ZOOM.

Many thanks to Amanda’s dissertation committee: • Committee Chair: Curtis Hall - Associate Professor – Drexel University • Committee Co-Chair: Anthony Curatola - Professor – Drexel University • Committee Member: Hiu Lam Choy - Associate Professor – Drexel University • Committee Member: Luke Watson - Assistant Professor – Villanova University • Committee Member: Andrew Finley - Assistant Professor – Claremont McKenna College

Abstract: I examine the effect of administrative authority on shareholder value. Specifically, I study Treasury Regulations related to IRC §7874, which were intended to significantly diminish the ability of U.S. multinational companies to avoid U.S. tax through inversion. I find a negative market reaction on dates when Treasury signals it will strengthen inversion restrictions and a positive reaction when the courts overturn Treasury’s attempts. Firms with high likelihood of inversion experience the strongest reaction, consistent with the market recognizing firm-level factors that make the use of this tax strategy more likely. I find that the initial notice related to the regulations elicits a stronger reaction than either the temporary or final regulations themselves. The study broadens our understanding of how shareholders react to Treasury Regulations, and how the intensity of that reaction varies along the path to enactment. It also brings some clarity to a mixed body of research regarding the economic impact of corporate inversions.