Short Term Impacts of the Corporate Income Tax Change on Stock Prices in Turkey

The aim of this paper is to analyze the short-term effects of the official announcement of the corporate income tax change on stock prices in Turkey in 2005. Prime Minister of Turkey announced the decline in corporate income tax rate on November 29, 2005. He indicated that the corporate tax rate would be decreased from 30% to 20% starting from the next year. In line with the market efficiency hypothesis, we use event study methodology to measure the effects of this announcement on asset prices. To the best of our knowledge, we are the first to analyze impacts of the announcement of the corporate income tax change in Turkey in 2005 on asset prices using substantially large data sets. Kandır and Yakar (2012) investigate the effects of the same announcement with five companies among highest corporate income tax payers in Istanbul Stock Exchange Market and they conclude that reactions in the stock returns were significant. We obtain that there is no significant change in asset prices in the event period using two different large sample sets. This result is parallel to the fact that stock prices in semi-efficient stock markets reflect publicly available information and expectation.