Research
Publication
Abstract
Prior studies of the relevance of long-term capital gains for stock prices rely on the evidence from the 1997 tax cut in the U.S. The primary component the tax-sensitive ownership in these studies is individual ownership, which is around 66.5%, on average. The sharp increase in institutional ownership since that time and the concomitant decline in individual ownership raises the question of whether long-term capital gains taxes are still relevant for stock prices. We examine the stock price response to the 2018 increase in the long-term capital gains tax rate in India, a market where individual stock ownership is only around 18.5%. Overall, the evidence provides strong support for the continued relevance of long-term capital gains taxes for stock prices despite individual investors accounting for only a small portion of the stock ownership.
Submitted version (available at SSRN)
Presented at
Southern Finance Association (SFA) Annual Meeting, 2020
Southwestern Finance Association (SWFA) Annual Meeting, 2020
Working Papers
Abstract
We find that rivals of both acquirers and targets experience an increase in their cost of bank loans following a vertical merger. We observe this increase whether or not the merger is part of an industry merger wave, mitigating concerns that our findings are driven by unobserved industry factors. While vertical mergers can foreclose input/output markets for rivals, they can also create efficiencies for the merging firms by reducing the holdup problem in relationship-specific investments. Utilizing asset specificity measures to assess the severity of the holdup problem, we find evidence that the cost of debt increases for rivals when vertical mergers are motivated more likely by foreclosure motives rather than efficiency motives.
Presented at
FMA Annual Meeting, October 2021, Denver, CO