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Stock market’s reactions to revelation of tax evasion: an empirical assessment

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  • Andreas, Brunhart

Abstract

Additionally to the financial crisis causing a world recession, Liechtenstein’s financial sector has been challenged by the so-called “Zumwinkel-Affair”, when a whistle-blower sold data of hundreds of tax evaders to international tax authorities. This paper investigates the impact of this affair, separated from the financial crisis, on the daily stock prices of banks from Liechtenstein. An “unconventional” augmented GARCH-model (labelled as “augmented amalGARCH”), which outperforms conventional models, is introduced and analyses the dynamical pattern and other influences on risk and average performance. Besides other findings, it can be concluded that the Zumwinkel-Affair had an (accumulating) effect on risk of stocks, but surprisingly no impact on average stock returns could be detected.

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  • Andreas, Brunhart, 2011. "Stock market’s reactions to revelation of tax evasion: an empirical assessment," MPRA Paper 42047, University Library of Munich, Germany, revised Sep 2012.
    • Handle: RePEc:pra:mprapa:42047
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    References listed on IDEAS

    as
    1. Andreas Brunhart, 2014. "Stock Market's Reactions to Revelation of Tax Evasion: An Empirical Assessment," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 150(III), pages 161-190, September.
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    Cited by:

    1. Andreas Brunhart, 2013. "Der Klein(st)staat Liechtenstein und seine grossen Nachbarländer: Eine wachstums- und konjunkturanalytische Gegenüberstellung," Arbeitspapiere 44, Liechtenstein-Institut.
    2. Andreas Brunhart, 2014. "Stock Market's Reactions to Revelation of Tax Evasion: An Empirical Assessment," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 150(III), pages 161-190, September.
    3. Dhammika Dharmapala & Vikramaditya S. Khanna, 2019. "Stock Market Reactions to India's 2016 Demonetization," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 16(2), pages 281-317, June.
    4. Brunhart, Andreas, 2012. "Liechtensteins neuere Wirtschaftshistorie: Erste Einsichten und Interpretationen der neu geschätzten Zeitreihen," KOFL Economic Focus 5, Konjunkturforschungsstelle Liechtenstein (KOFL), Vaduz.
    5. Brunhart, Andreas, 2012. "Identification of Liechtenstein's Historic Economic Growth and Business Cycles by Econometric Extensions of Data Series," MPRA Paper 44628, University Library of Munich, Germany.

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    More about this item

    Keywords

    Tax evasion; Liechtenstein; financial institutions; stock price volatility; augmented GARCH; amalGARCH;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G01 - Financial Economics - - General - - - Financial Crises
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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