A trader works on the floor of the New York Stock Exchange August 15, 2014. REUTERS/Brendan McDermid
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Establishing a tax domicile abroad to avoid U.S. taxes is a hot strategy in corporate America, but many companies that have done such "inversion" deals have failed to produce above-average returns for investors, a Reuters analysis has found. Looking back three decades at 52 completed transactions, the review showed 19 of the companies have subsequently outperformed the Standard & Poor's 500 index, while 19 have underperformed. The deals basically involve a U.S. company initially forming or buying a foreign company. Then the U.S. company shifts its tax domicile out of the U.S. and into the foreign company's home country. Companies that do these deals typically promise shareholders will benefit. Most have lagged the S&P 500 since their inversions were completed: McDermott by 85 percent; Rowan Cos Plc by 35 percent; Transocean Ltd by 18 percent; among others.Inverting usually does not mean a U.S. company fully decamps from home.In 1994, the company set up a Bermuda holding company and simply transferred its tax domicile into it.Despite the tax savings, Eaton has underperformed the S&P 500 by 5 percent since completing the Cooper deal in November 2012 .
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