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Capital gains tax on securities in Taiwan was resubmitted in Mar 2012 and reimplement from Jan 2013, but this taxation suffered the huge public pressure in the society and caused the decline of stock trading volume and finally abolished on the end of 2015. This study intends to combine behavioral finance and tax neutrality principle base on Lewin field theory to investigate whether investors’ psychology, investors’ behavior and the outer environment could be interact affected by taxation in Taiwan stock market. The empirical results have shown as follows: (1) Investor psychological impact-overreaction (GJR model): The taxation announcements (bad news) would affect investors into irrational bias and due to decrease original profit for investor would amplify the negative asymmetrical volatility in return rate of stock. (2) Investor behavior impact- Lock-in effect (CLRM and DID model): in a long term, the trading volume of Hong Kong stock market has been back to normal after the extension period to dilute other interference effect. However, the stock trading volume in Taiwan still has a 19.64% decrease comparing to that in Hong Kong. Such result indicates due to the taxation substitution effects, investors would shift their investment to other low-tax or free-tax goods. (3) Environment impact-adjustment of market microstructure, due to stock trading volume is depression by 25.38% after taxation announcement and implement, individual investor structure which has higher stock demand elasticity in Taiwan have been reduced by 12.99%. The microstructure adjustment and trading ecology of stock market could be interact affected by taxation lock-in effect and overreaction effect, which is worthy of the reference of the authorities. |
