Did ACRS Really Cause Stock Prices to Fall?
AbstractThis paper tests the hypothesis that the introduction of the Accelerated Cost Recovery System in 1981 caused a reduction in stock prices by reducing the value of existing capital. A second hypothesis that these depreciation changes benefited firms by increasing the return from new investment is also examined. Stock returns during the period surrounding enactment of this legislation are evaluated with data on capital stock and investment for over 800 firms. The empirical results suggest that neither hypothesis is an important determinant of cross-sectional differences in returns during this period. Differences in stock returns are in the direction predicted by the second hypothesis, but the relationship is not statistically significant. A test of the joint effects of both hypotheses operating simultaneously is supported by the data, but this relationship is also not statistically significant.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2990.
Date of creation: May 1989
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lyon, Andrew B., 1989.
"The effect of the investment tax credit on the value of the firm,"
Journal of Public Economics,
Elsevier, vol. 38(2), pages 227-247, March.
- Andrew B. Lyon, 1989. "The Effect Of The Investment Tax Credit On The Value Of The Firm," NBER Working Papers 2537, National Bureau of Economic Research, Inc.
- Roger H. Gordon & James R. Hines, Jr. & Lawrence H. Summers, 1987.
"Notes on the Tax Treatment of Structures,"
in: The Effects of Taxation on Capital Accumulation, pages 223-258
National Bureau of Economic Research, Inc.
- Don Fullerton & Yolanda K. Henderson, 1988.
"Long-Run Effects of the Accelerated Cost Recovery System,"
NBER Working Papers
0828, National Bureau of Economic Research, Inc.
- Fullerton, Don & Henderson, Yolanda Kodrzycki, 1985. "Long-run Effects of the Accelerated Cost Recovery System," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 363-72, August.
- Cutler, David M, 1988. "Tax Reform and the Stock Market: An Asset Price Approach," American Economic Review, American Economic Association, vol. 78(5), pages 1107-17, December.
- Downs, Thomas W & Tehranian, Hassan, 1988. "Predicting Stock Price Responses to Tax Policy Changes," American Economic Review, American Economic Association, vol. 78(5), pages 1118-30, December.
- Alan J. Auerbach & Laurence J. Kotlikoff, 1983.
"Investment versus Savings Incentives: The Size of the Bang for the Buck and the Potential for Self-Financing Business Tax Cuts,"
NBER Working Papers
1027, National Bureau of Economic Research, Inc.
- Alan J. Auerbach & Lawrence Kotlikoff, 1982. "Investment Versus Savings Incentives: The Size of the Bang for the Buck and the Potential for Self-Financing Business Tax Cuts," Cowles Foundation Discussion Papers 652, Cowles Foundation for Research in Economics, Yale University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.