The Australian bank levy: Do shareholders pay?

•Bank taxes have proliferated worldwide since the financial crisis.•We investigate the impact of the Australian Bank Levy on bank net-worth.•We find a significant loss of value for affected banks, following the introduction of the levy.•This suggests that the burden of the levy is borne partly by af...

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Bibliographic Details
Published in:Finance research letters 2019-03, Vol.28, p.412-415
Main Authors: Chronopoulos, Dimitris K., Sobiech, Anna L., Wilson, John O.S.
Format: Article
Language:English
Subjects:
Australian banks
Bank levy
Event study
Taxes
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Summary:•Bank taxes have proliferated worldwide since the financial crisis.•We investigate the impact of the Australian Bank Levy on bank net-worth.•We find a significant loss of value for affected banks, following the introduction of the levy.•This suggests that the burden of the levy is borne partly by affected bank shareholders. Since the global financial crisis, the tax treatment of banks has gained interest in academic and public policy arenas. In this paper, we investigate the stock price reaction of a small sample of commercial banks that were affected by the sudden introduction of a bank levy in Australia. The results of an event study analysis suggest that there is a significant decline in the returns of affected banks following the announcement of the bank levy. This suggests that the banks liable to pay the Australian bank levy lose a considerable percentage (5.2%) of their market capitalisation following its announcement.
ISSN:1544-6123
1544-6131
DOI:10.1016/j.frl.2018.06.010