The impact of luxury tax on related publicly traded company
Date Issued
2012
Date
2012
Author(s)
Chiou, Ming-Hung
Abstract
Abstract
From 2003 to 2010, Taiwan’s housing market has been rising. Take Taipei City as an example, the property price had been raised to more than double. Nevertheless, for the same period there was not any meaningful rise in people’s income and rent. This fact reveals that the rise of real estate might be due to the excessive money supply in the market. In order to avoid the blowup of real estate bubbles, the government has implemented luxury tax to curb the speculative activities on the residential properties.
This study attempts to examine whether luxury tax has any significant impact on Construction industry and Finance and Insurance industries in reality. It adopts the GARCH model, AR test, CTAR (Cumulative three-day abnormal returns) and CFAR (Cumulative five-daily abnormal returns) used in the methodology of event study to assess the share price performances of these two target industries. In this study, the findings show that estimated coefficients for Construction industry were mostly negative and their significance even reached 1 percent. This indicates that luxury tax had real significant effect on Construction industry. On the other hand, the estimated coefficients for Finance and Insurance industries in this study did not show such a clear pattern. It tells that luxury tax had little significant impact on this industry.
This paper also studies the impact of luxury tax on the financial ratios of listed companies on Taipei Stock Exchange (TSE) in order to seek in-depth understanding of the influence of public policies on share price. The purpose is to produce a possible meaningful reference so that government would take public expectation into account when forming future public policies and thereby achieving better social stability.
In this case, debt ratios, ROE, and market capitalization were made the independent variables while CTAR and CFAR were made dependent variables. The study findings show that luxury tax had little effect on share prices of companies with higher debt ratios. This may be attributed to that not many listed companies had real estate as one of main operating items and thus, bore little impact from luxury tax. ROE and market capitalization were also used to examine the expectation of the public on the stock market. It indicates that while the stock market was soaring, people tended to have unrealistic expectation for companies with high ROE and market capitalization, which led to the overdrop of share prices of these companies when the stock market stopped soaring.
Subjects
Luxury tax
event study
GRACH
SDGs
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
index.html
Size
23.27 KB
Format
HTML
Checksum
(MD5):7ff4a4a8d2171b069885a6ce5d995e5d