Dean Hanlon
Monash University
Sean Pinder
University of Melbourne
Abstract: The purpose of this paper is to examine whether an assetÂ’s qualification for discounted tax treatment is associated with systematic positive abnormal trading volumes and negative abnormal returns, as would be predicted if investors modified their behaviour so as to reduce their tax liability. In our examination of 152 initial public offerings (IPOs) we document that there is an incremental increase in abnormal trading volume for those IPOs that have experienced a significant increase in price since listing over those IPOs that have increased only marginally. We also provide limited evidence to suggest that this increase in trading volume is driven by selling pressure, as demonstrated by the negative, and statistically significant, mean abnormal return generated in the period immediately following the IPOs qualification for discounted tax treatment.
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