DP11837 Company Stock Price Reactions to the 2016 Election Shock: Trump, Taxes and Trade
Author(s): | Alexander F Wagner, Richard Zeckhauser, Alexandre Ziegler |
Publication Date: | February 2017 |
Date Revised: | July 2017 |
Keyword(s): | corporate interest payments, corporate taxes, election surprise, event study, post-news drift, Stock returns, trade policy |
JEL(s): | G12, G14, H25, O24 |
Programme Areas: | Financial Economics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=11837 |
Donald Trump?s surprise election shifted expectations: corporate taxes would be lower and trade policies more restrictive. Relative stock prices responded appropriately. High-tax firms and those with large deferred tax liabilities (DTLs) gained; those with significant deferred tax assets from net operating loss carryforwards (NOL DTAs) lost. Domestically-focused companies fared better than internationally-oriented firms. A price contribution analysis shows that easily-assessed consequences (DTLs, NOL DTAs, cash tax rates) were priced faster than more complex issues (net DTLs, GAAP tax rates, foreign exposure). High-tax firms outperformed (underperformed) on days when the media attended more (less) to corporate taxes.