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Politically Motivated Taxes in Financial Markets: The Case of the French Financial Transaction Tax

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  • Stephan Meyer

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  • Martin Wagener

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  • Christof Weinhardt

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Abstract

This paper studies the effects of the introduction of the French financial transaction tax in August 2012. With the tax, the French government aims to generate revenues for financing the burdens of the financial crisis and to curb short-term trading. We find that the financial transaction tax has a strong impact on trading intensity and liquidity supplier behavior. Trading volume decreases by about one-fifth compared to the pre-event period. While liquidity suppliers reduce the number of quote and price updates and post less volume at best prices, there is no evidence that spreads increase. Our results suggest that policy makers need to be well aware of the links between tax design and investor behavior, before introducing a financial transaction tax. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Stephan Meyer & Martin Wagener & Christof Weinhardt, 2015. "Politically Motivated Taxes in Financial Markets: The Case of the French Financial Transaction Tax," Journal of Financial Services Research, Springer;Western Finance Association, vol. 47(2), pages 177-202, April.
  • Handle: RePEc:kap:jfsres:v:47:y:2015:i:2:p:177-202
    DOI: 10.1007/s10693-013-0189-8
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:finsta:v:31:y:2017:i:c:p:81-92 is not listed on IDEAS
    2. Capelle-Blancard, Gunther & Havrylchyk, Olena, 2016. "The impact of the French securities transaction tax on market liquidity and volatility," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 166-178.
    3. repec:ire:issued:v:20:n:02:2017:p:207-219 is not listed on IDEAS
    4. Capelle-Blancard, Gunther, 2016. "The abrogation of the “Impôt sur les opérations de bourse” did not foster the French stock market," Finance Research Letters, Elsevier, vol. 17(C), pages 257-266.
    5. repec:eee:ecmode:v:67:y:2017:i:c:p:307-315 is not listed on IDEAS
    6. Cappelletti, Giuseppe & Guazzarotti, Giovanni & Tommasino, Pietro, 2017. "The stock market effects of a securities transaction tax: Quasi-experimental evidence from Italy," Journal of Financial Stability, Elsevier, vol. 31(C), pages 81-92.
    7. Eichfelder, Sebastian & Lau, Mona, 2016. "Financial transaction taxes: Announcement effects, short-run effects, and long-run effects," arqus Discussion Papers in Quantitative Tax Research 211, arqus - Arbeitskreis Quantitative Steuerlehre.
    8. Eichfelder, Sebastian & Lau, Mona & Noth, Felix, 2017. "Financial transaction taxes: Announcement effects, short-run effects, and long-run effects," IWH Discussion Papers 4/2017, Halle Institute for Economic Research (IWH).

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