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Unequal Rewards to Firms: Stock Market Responses to the Trump Election and the 2017 Corporate Tax Reform


Wagner, Alexander; Zeckhauser, Richard J; Ziegler, Alexandre (2018). Unequal Rewards to Firms: Stock Market Responses to the Trump Election and the 2017 Corporate Tax Reform. American Economic Association. Papers and Proceedings, 108(May):590-596.

Abstract

Massive dollars shuttled back and forth among firms on the twisted path to and passage of the 2017 tax reform. Prices of individual stocks responded to the difference between initial and revised expectations. From the bill’s initiation in the House to final passage, high-tax firms gained significantly, given the dramatic cut from 35% to 21% in the corporate tax rate. Internationally-oriented firms suffered notably, since investors assessed that the surprisingly high repatriation tax outweighed the benefits from territorial taxation. Daily price movements show that the aggregate market responded positively to lower expected taxes.

Abstract

Massive dollars shuttled back and forth among firms on the twisted path to and passage of the 2017 tax reform. Prices of individual stocks responded to the difference between initial and revised expectations. From the bill’s initiation in the House to final passage, high-tax firms gained significantly, given the dramatic cut from 35% to 21% in the corporate tax rate. Internationally-oriented firms suffered notably, since investors assessed that the surprisingly high repatriation tax outweighed the benefits from territorial taxation. Daily price movements show that the aggregate market responded positively to lower expected taxes.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:1 May 2018
Deposited On:21 Mar 2019 13:39
Last Modified:21 Mar 2021 08:24
Publisher:American Economic Association
ISSN:2574-0768
OA Status:Green
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1257/pandp.20181091
Related URLs:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3101872 (Organisation)
Other Identification Number:merlin-id:17681

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