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| Author: | Blouin, J. L. Raedy, J. S. Shackelford, D. A. |
| Title: | Capital Gains Taxes and Equity Trading: Empirical Evidence |
| Journal: | Journal of Accounting Research
2003 : SEP, VOL. 41: 4, p. 611-652 |
| Index terms: | TAXATION EQUITY CAPITAL STOCK MARKETS INVESTMENT INCENTIVES |
| Language: | eng |
| Abstract: | Individual investors have an incentive to defer selling appreciated stock until it qualifies for tax-favored, long- term capital gains treatment. Shackelford and Verrecchia show that these incentives can affect equity trading around public disclosures. This article provides some empirical support for their theory. The authors find share returns rise and trading volume falls with the incremental taxes saved by deferring the sale of appreciated property. The results are consistent with buyers believing the compensation to sell before long-term qualification is less costly than holding an inappropriately weighted portfolio. This finding adds to a growing literature that challenges longstanding assumptions that firm value is independent of shareholders and their taxes. |
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