The Australian Bank Levy : do shareholders pay?

Abstract

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.