With Congress adjourned, Bermuda has to wait and see if the trickle of corporate inversions starts again, or whether the uncertain future of proposals aimed at kerbing the practice has had a permanently chilling effect on the procedure.

Meanwhile, researchers at the University of Michigan and Harvard University have carried out an investigation into corporate inversions that comes to conclusions that will only surprise those outside Bermuda.

The desire to avoid paying US taxes on profits earned overseas, however, is not the only factor a firm considers when deciding to expatriate, the report says.

Instead, the decision to invert the corporate structure - so that the foreign subsidiary becomes the parent company and the US parent company becomes the subsidiary - is influenced by interest expense allocation rules associated with lost tax shields, and the forced capital gains realisation and consequent tax burden imposed on shareholders.

Professors James R. Hines Jr. of the University of Michigan Business School and Mihir A. Desai of the Harvard Business School carried out the survey.

In their study of the causes and consequences of expatriation, which will appear in the National Tax Journal, Hines and Desai found that firms most likely to expatriate are large and/or have extensive foreign assets, considerable debt and low foreign tax rates.

"Since the US system of taxing the worldwide incomes of American companies is particularly costly for firms with sizable interest expenses, as well as firms facing low foreign tax rates, this behaviour is consistent with allocation rules playing an important role in the decision to give up US identity," Hines says.

Stock price reactions to corporate inversion announcements are another determining factor in expatriation, the researchers say. They found that stock prices, on average, react positively to such news, with prices rising by an average of 1.7 percent over a five-day window centred on the announcement to expatriate (shares of inverting companies typically stand at just 88 percent of their average values of the previous year).

Stock price appreciation is greater for firms that have risen in value over the previous year. Every ten percent of prior share appreciation is associated with 1.1 percent greater market reaction to an inversion announcement.

Shareholders, therefore, incur sizable capital gains liabilities when required to tender their shares (in exchanging them for new shares) as part of the inversion process, Hines and Desai say. This will also not surprise anyone who has followed the inversions story.

Likewise, firms that are heavily leveraged and which, therefore, lose the ability to claim foreign tax credits they would need if American-owned, exhibit positive price reactions upon inversion, the professors added.

"The fact that embedded shareholder capital gains discourage inversions suggests a natural counterweight to the rush to expatriate, one that supplements any costs associated with being subject to the corporate laws of new host countries, and the public relations impact of abandoning the United States," Desai said.

In all, the study shows that firms consider the forced capital gains realisation and consequent capital gains tax burden imposed on shareholders in deciding whether or not to expatriate.

"The US principle of taxing the worldwide incomes of American companies, together with the various quirky features of the system, means that many American companies would benefit from having foreign rather than American identity for tax purposes," Hines said.

The report's conclusions, which were considered obvious by those looking at inversions from a non-US perspective, may help the newly-constituted House and Senate to react in a more balanced way to the notion of banning corporate inversions.