The Effects of Changes in Tick Size and Tax Rates on the Tax-Timing Option and the Market Response to Stock Distributions

IF 1.3 Q3 BUSINESS, FINANCE Journal of Accounting Auditing and Finance Pub Date : 2023-10-14 DOI:10.1177/0148558x231200920
Dean Crawford, Diana R. Franz, Collin Gilstrap, Gerald J. Lobo
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Abstract

This study examines how changes in tick size and the differential between short-term and long-term capital gain tax rates affect the market response to the announcement of stock distributions. Prior research finds that a stock distribution increases the volatility of the stock, which in turn increases the value of the stock’s tax-timing option. We show that the minimum tick size established by the exchange where the stock is traded affects a stock’s volatility and, therefore, the value of the tax-timing option and the market response to the stock distribution. We document a stronger relation between the market response and changes in volatility among large distributions than among small distributions. We also find a positive relation between the market response and the tax rate differential, although it is only significant for small distributions. Finally, we show that the relationship between the market response and changes in both volatility and tax rate differential is primarily driven by tax-sensitive institutional investors in the distributing firm.
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税收规模和税率变化对税收择时期权和市场对股票分配的反应的影响
本研究考察了变动幅度和短期和长期资本利得税税率之间的差异如何影响市场对股票分配公告的反应。先前的研究发现,股票分配增加了股票的波动性,这反过来又增加了股票的税收时机期权的价值。我们表明,由股票交易的交易所建立的最小滴答大小影响股票的波动性,因此,税收时机期权的价值和市场对股票分布的反应。我们记录了大分布的市场反应和波动率变化之间比小分布的市场反应和波动率变化之间更强的关系。我们还发现市场反应与税率差异之间存在正相关关系,尽管它仅对小分布具有显著性。最后,我们发现市场反应与波动性和税率差异变化之间的关系主要是由分销公司中对税收敏感的机构投资者驱动的。
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来源期刊
CiteScore
4.20
自引率
7.10%
发文量
27
期刊介绍: The Journal of Accounting, Auditing, and Finance (JAAF) is committed to publishing high quality studies in accounting and related fields. Papers on accounting issues relating to developing in other fields such as finance, economics, and operations are also welcome. Empirical, analytical and experimental works of all varieties and paradigms, normative as well as positive, will be considered, provided they significantly contribute to the advancement of our knowledge in accounting. Manuscripts submitted should contain original unpublished research and should not be under consideration for possible publication elsewhere.
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Auditor Choice and the Informativeness of 10-K Reports. Shared Auditors in Private Lending The Effects of Changes in Tick Size and Tax Rates on the Tax-Timing Option and the Market Response to Stock Distributions The Orbital Dynamics of Auditor Firm Rotation: Implications for Auditor Independence and Audit Quality Public Disclosure of Tax Strategies and Firm’s Actual Tax Policy
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