The Effects of Tax Regulations and Exchange Rate on the Behavior and Characteristics of Foreign Investors: A Case of Istanbul Stock Exchange
Date Issued
2008
Date
2008
Author(s)
Sönmez, Süleyman
Abstract
This thesis examines the effects of tax regulations and exchange rates on the behavior and characteristics of foreign investors on the Istanbul Stock Exchange (ISE). The relationship between the value of foreign ownership on the ISE and exchange rate is tested using Granger causality for the period covering November 28, 2005 to March 19, 2008. Empirical findings show that when Turkish Lira (TL) appreciates the foreign participation on ISE increases both in terms of percentage of total number of stocks and percentage of market capitalization. The Granger Causality test shows that the changes of foreign ownership are caused by the changes in the exchange rate; however, the changes of the exchanges rate are not caused by the changes in the ownership of foreigners on ISE.e further find that after the increases in the tax rate, the percentage of transactions made by foreign investors decreases, but with the elimination of taxes on foreign investors, it increases again. Analysis of media coverage around this topic is parallel with the existing theory about the “capital flight” and “return of capital flight” albeit the empirical findings do not show strong evidence for the return of capital.
Subjects
Istanbul Stock Exchange
Foreign Investors
Capital Flight
Type
thesis
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