Evaluation of Tax Inversion Deals

Despite regular legal and administrative efforts by countries, companies continue to use a controversial strategy known as" corporate inversion "or"tax inversion". In this regard, the goal is to determine the effectiveness of these transactions and create a fundamental basis on the experience of other researchers, considering the evolution of corporate inversions. To assess the effectiveness, we use the event analysis method and the Monte Carlo method based on 18 companies that performed tax inversions between 2008 and 2014. Companies were searched in Compustat and Thomson Reuters. According to the market model, the accumulated average excess return on firms is positive, which indicates the effectiveness of corporate inversions. In addition, the simulation showed that only with a 9% probability, this yield can be negative. Both methods worked effectively and are reliable and demonstrative.