Stock market’s reactions to revelation of tax evasion: an empirical assessment

Andreas, Brunhart (2011): Stock market’s reactions to revelation of tax evasion: an empirical assessment. Published in: KOFL Working Papers No. 9 (2012)

Abstract

Additionally to the financial crisis causing a world recession, Liechtenstein’s financial sector has been challenged by the so-called “Zumwinkel-Affair”, when a whistle-blower sold data of hundreds of tax evaders to international tax authorities. This paper investigates the impact of this affair, separated from the financial crisis, on the daily stock prices of banks from Liechtenstein. An “unconventional” augmented GARCH-model (labelled as “augmented amalGARCH”), which outperforms conventional models, is introduced and analyses the dynamical pattern and other influences on risk and average performance. Besides other findings, it can be concluded that the Zumwinkel-Affair had an (accumulating) effect on risk of stocks, but surprisingly no impact on average stock returns could be detected.

• Item Type: MPRA Paper
• Language: English
• Keywords: Tax evasion, Liechtenstein, financial institutions, stock price volatility, augmented GARCH, amalGARCH
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; G - Financial Economics > G0 - General > G01 - Financial Crises; C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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