Capital Market Reactions to Congressional Events Leading to the Passage of the American Taxpayer Relief Act of 2012

39 Pages Posted: 2 Mar 2018

See all articles by Zabihollah Rezaee

Zabihollah Rezaee

University of Memphis - School of Accountancy

Ji Woo Ryou

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American)

Lei Gao

Iowa State University

Date Written: March 2, 2018

Abstract

The American Taxpayer Relief Act (ATRA) was signed into law after the considerable congressional debate on January 2, 2013 to avert the fiscal cliff. We examine stock returns around major political and congressional events leading to the passage of the ATRA, which resulted in a partial resolution of the 2013 fiscal cliff and the government shutdown in 2013. We identify 18 congressional events associated with the fiscal cliff, the ATRA, and the partial government shutdown from November 7, 2012 to October 21, 2013. We find a positive stock market reaction on the days representing favorable steps toward averting the fiscal cliff, which threatened significant tax increases and spending cuts in the United States. We observe the opposite on days representing unfavorable initiatives that would have pushed the country over the fiscal cliff. We also find that some firm attributes and corporate governance measures are associated with the observed market reactions. Our results have policy, practical, and educational implications.

Keywords: 2013 Fiscal cliff, Market Reactions, American Taxpayer Relief Act of 2012, Government Shutdown, Corporate Governance

JEL Classification: E62; H30; G12; G18

Suggested Citation

Rezaee, Zabihollah and Ryou, Ji Woo and Gao, Lei, Capital Market Reactions to Congressional Events Leading to the Passage of the American Taxpayer Relief Act of 2012 (March 2, 2018). Available at SSRN: https://ssrn.com/abstract=3133035 or http://dx.doi.org/10.2139/ssrn.3133035

Zabihollah Rezaee (Contact Author)

University of Memphis - School of Accountancy ( email )

Fogelman College of Business and Economics
Memphis, TN 38152-6460
United States
901-678-4652 (Phone)

Ji Woo Ryou

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) ( email )

1201 W. University Dr.
BUSA 220
Edinburg, TX 78539
United States
956-665-8073 (Phone)

Lei Gao

Iowa State University ( email )

613 Wallace Road
Ames, IA 50011-2063
United States

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