The Impact of Financial Transaction Taxes on Stock Markets: Short-Run Effects, Long-Run Effects, and Reallocation of Trading Activity

Eichfelder, Sebastian; Noack, Mona; Noth, Felix

doi:10.1086/720406

Cited by 3 publications

(2 citation statements)

References 35 publications

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“…Surprisingly, even though high-frequency investors were mostly exempt from the tax, their trading activity decreased by 35%. According to a study by Eichfelder, et al (2018), trading volume was significantly decreased after the financial transaction tax was implemented. However, this effect was temporary and mainly affected stocks with low liquidity.…”

Section: Constitutional Aspects Of a Proposed Financial Transaction T...mentioning

confidence: 99%

Possibilities of the Introduction of a Financial Transaction Tax in Germany: Comparison and Evaluation on the Basis of the Italian and French Transaction Tax With Regard of the EU Taxation Principles

Giambrone

2023

JAF

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This article evaluates the financial and economic implications of implementing a stock financial transaction tax (FTT) in Germany, setting aside the political dimensions prevalent in European discussions. It finds that an FTT decreases market efficiency and does not aid in stabilizing the financial system. Observations from France and Italy, where FTTs yielded revenues below projections, suggest that such a tax might be economically unfeasible for Germany. The study investigates whether a national FTT targeting transactions of German company shares on domestic exchanges—and levying the tax on the purchaser—conflicts with European Union principles, especially the free movement of capital as stated in Articles 63-65 of the Treaty on the Functioning of the European Union (TFEU). Moreover, it scrutinizes the compatibility of the proposed Franco-German cooperative FTT with German constitutional law and whether the financial sector’s contribution to the public good justifies the tax base under the Basic Law’s tax typology.

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Section: Constitutional Aspects Of a Proposed Financial Transaction T...mentioning

confidence: 99%

Possibilities of the Introduction of a Financial Transaction Tax in Germany: Comparison and Evaluation on the Basis of the Italian and French Transaction Tax With Regard of the EU Taxation Principles

Giambrone

2023

JAF

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“…However, Saret (2014) and Miller and Tyger (2020) argue that financial transaction taxes reduce efficiency by lowering trading and liquidity. Conversely, Stiglitz (1989), Eichfelder and Lau (2017) found that transaction taxes can reduce volatility and improve efficiency. Veryzhenko, et al (2022) propose a Non-Value-Added Tax that taxes profitable transactions not supported by fundamentals, which they claim could enhance market efficiency.…”

Section: Ways To Improve Stock Market Efficiency: a Reviewmentioning

confidence: 99%

Modernizing the Stock Pricing Mechanism: An Effective Path to Improve the Stock Market Efficiency

Hani Saad

2023

IBR

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This study investigates whether regulating the stock pricing mechanism by adopting an agreed-upon efficient stock valuation model can enhance the stock market efficiency. The study involves a simulated stock market experiment with 65 traders who provide daily stock price predictions for a virtual company under unregulated and regulated scenarios. In the regulated scenario, traders agree on one of three valuation models to generate stock prices. Moreover, 20 evaluators acted as “Homo-Economicus” to determine a stock's fair value trend, serving as a benchmark to assess the information efficiency of the simulated market. The study finds that the NAPV-regulated market shows a strong linear relationship and high R-squared, indicating the highest level of information efficiency, while the DDM- and RIM-regulated markets show moderate correlations. The study suggests that modernizing the stock pricing mechanism, by regulating shareholders to mutually agree on one efficient stock valuation model to be used by the company to generate fair values alternative to market prices, could significantly enhance the stock market efficiency by focusing on fundamentals rather than irrational speculators. However, model choice matters, as NAPV explains more variation. The study suggests that appropriate regulation is crucial for realizing this potential. Although the results are promising, limitations like small evaluator samples, inability of models to always generate stock values, and trader biases should be considered. Future research with larger samples and more models could strengthen these insights.

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How Do Corporate Tax Rates Alter Conforming Tax Avoidance?

Eichfelder,

Jacob,

Kalbitz

et al. 2024

European Accounting Review

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We examine an international panel of domestic firms to quantify the degree to which conforming tax avoidance changes with statutory tax rates. We derive an alternative estimation method that identifies conforming tax avoidance from the variation of tax rates over time and across countries. We incorporate a series of validation tests by considering an alternative measure of conforming tax avoidance, investigating alternative channels for this type of tax avoidance, and showing a more pronounced response to tax rates when a country observes a significant increase in conformity between its book and tax reporting. Overall, we find a 1-percentage point decrease in the corporate tax rate corresponds with a 1.5 percent increase in pre-tax book income in domestic firms, which we interpret as a substantial conforming tax avoidance response by these firms. We also provide preliminary evidence that this type of activity plays a role in multinational firms.

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The Impact of Financial Transaction Taxes on Stock Markets: Short-Run Effects, Long-Run Effects, and Reallocation of Trading Activity

Cited by 3 publications

References 35 publications

Possibilities of the Introduction of a Financial Transaction Tax in Germany: Comparison and Evaluation on the Basis of the Italian and French Transaction Tax With Regard of the EU Taxation Principles

Possibilities of the Introduction of a Financial Transaction Tax in Germany: Comparison and Evaluation on the Basis of the Italian and French Transaction Tax With Regard of the EU Taxation Principles

Modernizing the Stock Pricing Mechanism: An Effective Path to Improve the Stock Market Efficiency

How Do Corporate Tax Rates Alter Conforming Tax Avoidance?

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