Date of Award

Spring 5-25-2019

Document Type


Degree Name

Doctor of Business Administration (DBA)



First Advisor

William R. McCumber


International corporate finance has greatly expanded with the increased globalization and led to many new research topics. In this dissertation, I examine two distinct international finance topics; (i) determinants of corporate tax inversion and the effects ex-post; and (ii) determinants of for-profit microfinance institutions and financial and social performance.

In Chapter 1, I study corporate tax inversion which is a reorganization by which a domestic firm changes its tax-domicile from the United States to a foreign country with a lower corporate tax rate. In 2014 alone, U.S. public companies valued at over half a trillion dollars announced their intention to invert as part of a merger/acquisition deal (Babkin, Glover, and Levine, 2016). The United States corporate tax rate of 35% (one of the highest in the world) is not the only incentive for corporations to move their legal domicile; the U.S. also taxes firms on their foreign and domestically-sourced income (Gunn and Lys, 2016). Avoiding these higher taxes through inversions and earnings stripping (shift income from its U.S. based subsidiaries to its new lower tax domicile) are legal practices and in line with the firm’s goal of maximizing the market value of shareholder equity. Using hand collected data for the period 1983-2015, I find that 43 U.S. public firms from NYSE/AMEX/NASDAQ, across 15 unique industries have completed a corporate inversion and moved their legal tax domicile to one of ten different countries with a lower corporate tax rate. This study focuses on the determinants of inversion, economic freedom measures of the target countries, the market reaction of the inversion announcement and ex-post firm financials and taxes. I find that large firms that are less profitable (measured by return on assets) are more likely to invert and the inversion target location is more likely to have greater tax freedom and investment freedom. The overall market reaction of the inversion announcement is positive and significant over a seven day (-3, +3) event window and this is driven by more recent inversions (post 2004) to non-tax haven countries (Canada, Australia, and European). Ex-post the inverted firms show no significant change in taxes compared to a matched sample when controlling for industry, size, sales, and profitability.

In Chapter 2, I study the determinants of for-profit microfinance institutions and the financial and social performance. Microfinance institutions (MFIs) provide small loans and other financial services to the poor and unbanked all over the world. The microfinance industry started out as a non-profit business however we have seen growth of for-profit MFIs and commercial banks breaking into this sector which began debates about whether it is possible to effectively blend nonprofit ideals (social outreach) and forprofit orientations and practices; i.e. financial performance and sustainability (Morduch, 2000). Literature argues that primary goal of the MFI is to reach the poorest sections of the population and the second goal is financial sustainability (Mersland and Strøm, 2008). The founder of Grameen banfiguk (the first microfinance institution) and winner of the Nobel Peace Prize, Muhammad Yunus, argues that MFIs that seek to maximize profits will do so at the cost of the poor and will trade off social performance for financial performance (Yunus, 2011). Claims are also made that MFIs experience “mission drift” as they cater to customers who are better off than their original customers (Mersland and Strøm, 2010). The goal of this paper is exploratory in nature and seeks to study the evolution of the international microfinance industry, specifically the differences in forprofit and non-profit institutions. Is there a place for profit seeking firms in the business of providing the poor access to loans and other financial services? Can these firms sustainably operate while also fulfilling the mission for whom non-profit microfinance institutions were originally created? Which types of firms are more successful, both financially and socially and what are the determinants of this success? Do country specific formal institutions, cultural dimensions, and development play a role in the performance (financially and socially) and likelihood of MFIs being for-profit institutions?

Using a large dataset of more than 2,400 individual microfinance institutions (MFIs) from 120 countries for the period of 1999-2016, I find that nearly half of the international MFIs operate as for-profit institutions. For-profit MFIs tend to have more administrative expenses, pay higher salaries, are more profitable, have more staff turnover, and charge higher interest rates (on average). Non-profit MFIs tend to be busier, pay less tax, have larger boards, and have a larger percentage of the board and borrowers that are female. The formal institutions within a country such as; business regulatory environment, property rights, social protection, and a developed financial sector, are significant determinants of for-profit MFIs. Cultures with higher degrees of power distance, individualism, masculinity and indulgence (from Hofstede’s cultural dimensions) tend to have more for-profit MFIs. Cultural dimensions and formal institutions at the country level tend to result in better financial and social performance for the microfinance institution.