The Impact of the Integrated Housing and Land Income Tax System on the Stock Prices of the Construction Companies

In order to make real estate transactions information more transparent and to curb the housing prices hike effectively, the government has proposed a series of relevant housing policies from financial credit limit, the specifically selected goods and service tax act, real price registration to integrated housing and land tax system recently passed by the legislative yuan to improve the development of the housing market. Using event study methods, this study examines the stock market reactions of the construction industry to the two selected event periods of the integrated housing and land tax system. Moreover, this research explores the relation between the stock cumulative abnormal returns (CAR) of this policy and firm characteristics such as land-to-total assets ratio (for sale), net income, debt ratio, and the size of company. This study finds that investors sell the stock when the market expected the implement of the integrated housing and land tax system might reduce the net income of the construction industry. As a result, the stock prices would experience significantly negative cumulative abnormal returns (CAR) in the second event period, and the companies with greater net income, higher debt ratios and smaller sizes tend to have less cumulative abnormal returns (CAR).