Long‐term capital gains taxes and stock prices: Evidence from India

2021 ◽  
Author(s):  
Mohammadali Fallah ◽  
Palani‐Rajan Kadapakkam
Keyword(s):  
Stock Prices ◽  
Capital Gains ◽  
Capital Gains Taxes

Capital Gains Taxes and the Market Response to Earnings Announcements

2019 ◽  
Vol 42 (1) ◽  
pp. 1-22
Author(s):  
Greg Clinch ◽  
Bradley P. Lindsey ◽  
William J. Moser ◽  
Mahmoud Odat
Keyword(s):  
Stock Price ◽  
Trading Volume ◽  
Public Information ◽  
Strong Support ◽  
Capital Gains ◽  
Tax Rate ◽  
Price Response ◽  
Capital Gains Taxes ◽  
Public Signal

ABSTRACT We investigate the stock price and trading volume effects of differential capital gains taxes applied to short- and long-term capital gains when firms disclose public information. We extend the theoretical framework developed in Shackelford and Verrecchia (2002) linking differential capital gains taxes to price and volume, allowing for positive and negative news and incorporating exogenous non-taxable, uninformed traders. Our model, like Shackelford and Verrecchia (2002), indicates that price responses to public information are magnified, and volume inhibited, when short-term capital gains attract a higher tax rate than long-term capital gains. However, the effects are more nuanced than those in Shackelford and Verrecchia (2002). Specifically, the degree of magnification/inhibition for price reaction and trading volume differs across well-defined regions of public signal and supply change realizations. We use actual stock price and trading data to empirically investigate these predictions. Our results provide strong support for the price response predictions.

The Effect Of South African Dividend And Capital Gains Taxes On Share Prices And Investor Expected Returns

2014 ◽  
Vol 30 (3) ◽  
pp. 895 ◽  
Author(s):  
Francois Toerien ◽  
Matthew Marcus
Keyword(s):  
South African ◽  
Stock Prices ◽  
Firm Value ◽  
Capital Gains ◽  
Capital Gains Tax ◽  
Expected Return ◽  
Share Prices ◽  
Valuation Model ◽  
Capital Gains Taxes ◽  
Residual Income Valuation

<p>We examine the effect of South African taxes, specifically the secondary tax on companies (STC) and the dividends tax (DT) that replaced it, as well as capital gains tax (CGT), on investor measures of expected return and firm value. The discussion, findings, and models presented in this study are entirely original in the field of South African corporate finance research. We model the relationship between STC, CGT, and expected return and use this relationship to formulate an hypothesis of the expected behaviour of ex-ante measures of implied cost of capital for a sample of listed South African companies. We calculate these measures by formulating a unique South African version of the residual income valuation model (RIVM) and then regress derived measures of the implied equity premium on historical measures of dividend yield, ultimately concluding that investors appear to recognise the net tax benefit of dividends and capitalise this benefit into stock prices. Finally, we examine the expected position of each of these areas in light of the proposed shareholder dividend tax regime.</p>

scholarly journals Policy Watch: Cutting Capital Gains Taxes

1991 ◽  
Vol 5 (1) ◽  
pp. 181-192 ◽  
Author(s):  
Gerald E Auten ◽  
Joseph J Cordes
Keyword(s):  
Economic Performance ◽  
Tax Reform ◽  
Capital Gains ◽  
Tax Rates ◽  
Capital Gains Tax ◽  
Taxable Income ◽  
Capital Gains Taxes ◽  
Lively Debate ◽  
Policy Watch

From 1922 to 1986, long-term capital gains were taxed at lower rates than other income, generally by allowing a portion of long-term capital gains to be excluded from taxable income. While taxing capital gains at the same rates as other income has been hailed by some as a major accomplishment of tax reform, it has been criticized by others as one of its main flaws. As a result, there have been proposals each year since 1986 to restore some type of capital gains preference. These proposals have sparked a lively debate centered on three main questions: Would reducing the capital gains tax lower or raise federal revenues? Who benefits most from cutting the capital gains tax? Would lower tax rates on capital gains improve economic performance?

Macroeconomic Factors and Pakistani Equity Market”

2004 ◽  
Vol 43 (4II) ◽  
pp. 619-637 ◽  
Author(s):  
Muhammad Nishat ◽  
Rozina Shaheen
Keyword(s):  
Stock Market ◽  
Industrial Production ◽  
Stock Prices ◽  
Stock Price ◽  
Consumer Price Index ◽  
Reverse Causality ◽  
Macroeconomic Factors ◽  
Macroeconomic Variables ◽  
Equilibrium Relationships

This paper analyzes long-term equilibrium relationships between a group of macroeconomic variables and the Karachi Stock Exchange Index. The macroeconomic variables are represented by the industrial production index, the consumer price index, M1, and the value of an investment earning the money market rate. We employ a vector error correction model to explore such relationships during 1973:1 to 2004:4. We found that these five variables are cointegrated and two long-term equilibrium relationships exist among these variables. Our results indicated a "causal" relationship between the stock market and the economy. Analysis of our results indicates that industrial production is the largest positive determinant of Pakistani stock prices, while inflation is the largest negative determinant of stock prices in Pakistan. We found that while macroeconomic variables Granger-caused stock price movements, the reverse causality was observed in case of industrial production and stock prices. Furthermore, we found that statistically significant lag lengths between fluctuations in the stock market and changes in the real economy are relatively short.

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