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

Meyer, Stephan; Wagener, Martin; Weinhardt, Christof

doi:10.1007/s10693-013-0189-8

Cited by 32 publications

(37 citation statements)

References 23 publications

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“…Volume predominantly decreases with rise in STT rate as shown by Pomeranets and Weaver (2013) for USA, Baltagi et al (2006), Su andZheng (2011) andWang andLi (2012) for China, Liu (2007) for Japan, Umlauf (1993) for Sweden and Becchetti et al (2014), Capelle-Blancard and Havrylchyk (2014), Meyer et al (2013), Colliard and Hoffmann (2015) and Coelho (2014) for the French implementation analyzed in this paper. Absence of an effect of STT on volume traded is documented by Hu (1998), who assesses STT changes for several countries in Asia, but he doesn't utilize control groups as he analyzes the changes using equality tests, hence the method is unable of identifying causal effects.…”

Section: Volume and Liquiditysupporting

confidence: 60%

“…Haferkorn and Zimmermann (2013) find negative impact of French STT on order book volume, but their results also point to relative increase in bid-ask spreads. Meyer et al (2013) and Colliard and Hoffmann (2015) on the other hand find no effect of French STT introduction on spreads, but confirm negative effect of STT on order book volume. Rühl and Stein (2014) provide evidence of quoted bid-ask spread increase following Italian STT implementation.…”

Section: Introductionmentioning

confidence: 77%

“…Acquisitions of bonds exchangeable or convertible into stock. Meyer et al (2013) argue that most of the estimated effects may be credited to STT as the HFT tax rate is much lower. Colliard and Hoffmann (2015) devise a simple approach to isolate the effects of the two taxes, which is also used in this paper.…”

Section: Overview Of Implementations Francementioning

confidence: 99%

“…4 Securities transaction tax (STT) according to the FTT categorization provided by Matheson (2012). Hu (1998) Taiwan, Hong Kong, S. Korea, Japan STT 80 weeks no effect no effect no effect negative Baltagi et al (2006) China STT 1 year positive no effect** negative - France STT 1 year no effect no effect**** negative - Meyer et al (2013) France STT 4 months -negative negative - Colliard and Hoffmann (2015) France STT 5 months no effect negative negative - Haferkorn and Zimmermann (2013) France STT up to 80 days no effect negative negative/no effect - Coelho (2014) France and Italy STT up to 4 months no effect no effect negative in France/ no effect in Italy negative Rühl and Stein (2014) Italy STT 120 days positive negative no effect -*-for individual stocks and portfolio estimates respectively, **-based on anecdotal evidence, ***-the effect is negative in DiD, but in RD is only statistically significant in the slope implying that STT's effect on volume is more negative for larger cap stocks, ****-depends on control group of Italy by Coelho (2014) and Rühl and Stein (2014), which are only two papers to my knowledge that study the case of Italian STT. Haferkorn and Zimmermann (2013) find no effect of French STT on volume traded using DAX30 stocks as control group, but they assess the STT effect only on CAC40 constituents, which might drive this result.…”

Section: Introductionmentioning

confidence: 99%

“…Additionally control variables, , it X , for market capitalization, logMC, and average price, logaprice, are included in the model in alternative specification, which yields similar results and hence is not reported in the paper 32 . This specifications partly follows Meyer et al (2013). Capelle-Blancard and Havrylchyk (2014) and Coelho (2014) don't incorporate any control variables in their models 33 .…”

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confidence: 99%

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The impact of Securities Transaction Tax on market quality: Evidence from France and Italy

Šramko¹

2015

IJoES

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This paper analyzes two recent securities transaction tax (STT) implementations in France and Italy in order to identify the effects of STT on market quality. The effects are observed on panel data in four periods utilizing several trading activity and market quality measures. Difference-in-Differences are estimated using several control groups including German and Spanish equities. The results suggest significant decrease in trading activity and liquidity in French taxed stocks following the STT levy. The effect of STT on volatility is statistically insignificant across different control groups and estimation periods. The need to account for seasonal effects is also demonstrated. In Italian case, the results are inconclusive due to possible contamination by political events, but the evidence points to decrease in trading activity following the reform. The evidence regarding volatility and liquidity in Italian case is mixed. Keywords: Financial Transaction Tax, Market Quality, Volatility, Liquidity, Securities Transaction Tax JEL Classification: G18, G12, G14 Authors:FILIP ŠRAMKO, University of Economics in Prague, Czech Republic, Email: fsramko@gmail.com Citation:FILIP ŠRAMKO (2015). The impact of Securities Transaction Tax on market quality: Evidence from France and Italy. International Journal of Economic Sciences, Vol. IV(3), pp. 52-93., 10.20472/ES.2015.4.3.004 52 Copyright © 2016, FILIP ŠRAMKO, fsramko@gmail.com IntroductionThe idea of Financial Transaction Tax (FTT) has recently gained a renewed support from renowned economists 1 and wide public 2 . Most prominently 11 EU states are in talks to introduce FTT as soon as 2017 (Reuters, 2015). Besides revenue-raising FTTs are meant to discourage financial transactions that do not enhance efficiency of financial market and as a consequence to curb excess volatility observed in financial markets 3 . Hence FTTs should function as Pigouvian taxes.The objective of this paper is to extend previous empirical evidence and verify the effects of FTT imposed in securities market, or Securities Transaction Tax (STT) 4 , on market quality measures, most notably volatility, in France and Italy. Especially Italian case has garnered limited attention.To analyze the effects Difference-in-Differences (DiD) as well as triple DiD are estimated using individual stock panel data. The estimations are performed using several control groups including German and Spanish stocks observing STT's effects on volume, several measures of liquidity and volatility. Current paper adds to the literature by analyzing impacts of STT on liquidity and volatility using several measures of each market quality measure for both France and Italy. Main contribution of this paper is detailed analysis of Italian reform extending the evidence provided by Coelho (2014).The results of this paper confirm previous evidence evaluating French and Italian policy changes. It is shown that trading activity significantly decreases in France and suggestive evidence is provided showing an increase i...

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Section: Volume and Liquiditysupporting

confidence: 60%

Section: Introductionmentioning

confidence: 77%

Section: Overview Of Implementations Francementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

mentioning

confidence: 99%

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The impact of Securities Transaction Tax on market quality: Evidence from France and Italy

Šramko¹

2015

IJoES

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US experience with futures transaction taxes

Mixon

2021

Journal of Futures Markets

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The transaction tax on futures reduced trading volume during the 1920s and 1930s but had no apparent effect on volatility or open interest. The relative magnitude of the tax was highest for intermediaries and appears to have substantially reduced intra-day trading, but it did not dramatically affect hedging activity or the level of cash or futures prices. Pit traders were particularly distressed by a 400% increase in the tax rate in 1932 and effectively widened spreads by avoiding trades at the minimum price increment. This doubling of the minimum tick size was formally implemented in exchange rules 1 year later.

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Securities transaction taxes and stock price informativeness: evidence for France and Italy

Silva

2023

Financ Mark Portf Manag

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This empirical study addresses the impact of securities transaction taxes (STTs) on price informativeness. Two specific events are assessed: the entry into force of STTs in France and Italy in 2012 and 2013, respectively. Specifically, it is gauged whether those events produced effects on the future earnings response coefficient (FERC)—a proxy for the capacity of investors to anticipate future earnings—of the stocks eligible for the STT. Our findings indicate that the new taxes on securities transactions that entered into force in France and Italy were neutral with respect to the effects on price informativeness. That is, no material changes in the FERC of affected stocks are detected in the aftermath of the STTs’ entry into force. This result applies when considering the events in France and Italy separately, and when analyzing different subsets of the sample based on the size, trading activity, and liquidity of the stocks.

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

Cited by 32 publications

References 23 publications

The impact of Securities Transaction Tax on market quality: Evidence from France and Italy

The impact of Securities Transaction Tax on market quality: Evidence from France and Italy

US experience with futures transaction taxes

Securities transaction taxes and stock price informativeness: evidence for France and Italy

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