{"title":"Do Personal Taxes Affect Investment Decisions and Stock Returns?","authors":"Alexander P. Kontoghiorghes","doi":"10.2139/ssrn.3733894","DOIUrl":null,"url":null,"abstract":"I study the causal effects of personal investment taxes on stock demand, stock returns, and the dividend policy of companies. I exploit a change in legislation in 2013 which allowed stocks listed on the Alternative Investment Market, a sub-market of the London Stock Exchange, to be held in a capital gains and dividend tax-exempt investment account for the first time. Using a difference-in-differences approach, I find that after the tax cut, stock demand increased, stock returns decreased, and dividends increased. I rationalize my results by introducing a life-cycle model which incorporates two risky assets with varying taxes. My results demonstrate the importance of personal taxes for both investors and companies.","PeriodicalId":363551,"journal":{"name":"ERN: Other Macroeconomics: Consumption","volume":"54 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2020-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"ERN: Other Macroeconomics: Consumption","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3733894","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
I study the causal effects of personal investment taxes on stock demand, stock returns, and the dividend policy of companies. I exploit a change in legislation in 2013 which allowed stocks listed on the Alternative Investment Market, a sub-market of the London Stock Exchange, to be held in a capital gains and dividend tax-exempt investment account for the first time. Using a difference-in-differences approach, I find that after the tax cut, stock demand increased, stock returns decreased, and dividends increased. I rationalize my results by introducing a life-cycle model which incorporates two risky assets with varying taxes. My results demonstrate the importance of personal taxes for both investors and companies.