Welcome to Revise and Resubmit, the podcast where complex research meets engaging conversation. Today, we’re tackling a topic that’s been on the minds of every investor and corporate strategist—taxes. But we’re not just talking numbers. We're diving into the ripple effects that personal taxes can have on investment decisions, stock returns, and even how companies manage their cash flow.
At the heart of this episode is the paper, “Do personal taxes affect investment decisions and stock returns?” authored by Alexander P. Kontoghiorghes. Published in the highly esteemed Journal of Financial Economics, which proudly belongs to the FT50 list, this research gives us a front-row seat to a natural experiment in the UK stock market.
In 2013, new legislation allowed stocks listed on the Alternative Investment Market (AIM) to be held in tax-exempt savings accounts for the first time. The results? Stock returns dropped, reflecting their pre-legislation tax rates, and companies made big shifts in their strategy—boosting dividends, capital spending, and labor investments. This paper taps into the “traditional view” of corporate finance, showing how tax policy doesn't just stay on paper—it changes behavior in boardrooms and beyond.
Thanks to Alexander P. Kontoghiorghes and Elsevier, this fascinating research is open access, making it available for everyone to explore.
So, here’s a question: If a tax tweak can reshape markets and drive companies to rethink their strategies, what other hidden levers might be waiting to be pulled in the global economy? Stay with us as we unpack this intriguing study.
Reference
Kontoghiorghes, A. P. (2024). Do personal taxes affect investment decisions and stock returns? Journal of Financial Economics, 103927. https://doi.org/10.1016/j.jfineco.2024.103927

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