Investor behaviour in response to Australia’s capital gains tax |
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| Authors: | Philip Brown Andrew Ferguson Sam Sherry |
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| Institution: | 1. School of Accounting, Australian School of Business, The University of New South Wales, Sydney, NSW 2052;2. and Business School, The University of Western Australia, Crawley, WA 6009, Australia;3. School of Accounting, University of Technology, Sydney, NSW 2007, Australia;4. Ernst & Young, Sydney, NSW 2000, Australia |
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| Abstract: | We calibrate the effect of Australia’s Capital Gains Tax (CGT) on share prices and market activity. Based on a large sample drawn from all listed Australian companies for the years 1994–2007, we find significant tax‐loss selling (TLS) of shares that lost value over the financial year, which is reflected in unusually high trading volume and more sell orders in June and a rebound in July. There is some evidence that small mining stocks are particular targets for TLS. Interestingly, the 1999 CGT reforms, which introduced concessions for long‐term capital gains, did not reduce the incidence of TLS. |
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| Keywords: | Capital gains tax Tax‐loss selling Extractive industries Investor behaviour G12 G18 |
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