IDEAS home Printed from https://ideas.repec.org/a/eee/pacfin/v85y2024ics0927538x2400074x.html
   My bibliography  Save this article

Election-day market reactions to tax proposals: Evidence from a close vote

Author

Listed:
  • Orihara, Masanori

Abstract

We ask whether stock markets react to political leaders' intentions to tax shareholders immediately following their election. Our natural laboratory is the surprising outcome of the September 2021 Japanese Prime Ministerial election. Using an event study approach, we find firms that are vulnerable to a potential tax increase, such as those paying or receiving dividends, demonstrate lower stock returns compared to their counterparts. In contrast, our analysis does not show differences in stock returns between firms earning interest income and those that do not. Moreover, among high dividend yield firms, a striking contrast emerges: those with substantial individual ownership show a decline in stock returns, while those with significant foreign ownership exhibit an increase. These results highlight the targeted impact of shareholder taxation on domestic shareholders, distinguishing them from debt holders or foreign investors, right from Election Day.

Suggested Citation

  • Orihara, Masanori, 2024. "Election-day market reactions to tax proposals: Evidence from a close vote," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x2400074x
    DOI: 10.1016/j.pacfin.2024.102323
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927538X2400074X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.pacfin.2024.102323?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Taxation; Election; Dividend; Ownership structure; Japan;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x2400074x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/pacfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.