Unequal Rewards to Firms: Stock Market Responses to the Trump Election and the 2017 Corporate Tax Reform
AEA Papers and Proceedings
vol. 108,
May 2018
(pp. 590-96)
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 percent to 21 percent 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.Citation
Wagner, Alexander F., Richard J. Zeckhauser, and Alexandre Ziegler. 2018. "Unequal Rewards to Firms: Stock Market Responses to the Trump Election and the 2017 Corporate Tax Reform." AEA Papers and Proceedings, 108: 590-96. DOI: 10.1257/pandp.20181091Additional Materials
JEL Classification
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- G14 Information and Market Efficiency; Event Studies; Insider Trading
- H25 Business Taxes and Subsidies including sales and value-added (VAT)