Do personal taxes affect investment decisions and stock returns?
Alex Kontoghiorghes ()
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Alex Kontoghiorghes: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
No 988, Bank of England working papers from Bank of England
This paper studies the causal effects of personal investment taxes on stock demand, stock returns, and the financial decisions 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 stock demand temporarily doubled, long-run stock returns decreased by 2 percentage points per month, dividend payments increased by 29%, and that the capital structure and shareholder composition permanently changed post-legislation.
Keywords: Personal investment taxes; tax capitalisation; dividend policy; capital structure (search for similar items in EconPapers)
JEL-codes: G11 G12 G18 G32 G35 H24 (search for similar items in EconPapers)
Pages: 57 pages
New Economics Papers: this item is included in nep-cfn and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0988
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