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Purpose This study aims to analyze the Indian equity market response to the Goods and Services Tax (GST) regulations and also examines the sectoral heterogeneity in investor reaction to GST legislation. Design/methodology/approach The study operationalized a two-phased event study design, considering the GST regulation of 2017 as the first event and the GST reforms of 2025 as the subsequent event. Using the daily stock returns of 819 listed companies for 271 trading days, the abnormal returns (ABRs) were analyzed over a 21-day event window. Moreover, the study analyzes the industry- and firm-level heterogeneity and performs several robustness tests, including a placebo test, alternate measures of market return, and an alternative estimation window. Findings The event study results signify contradictory market reactions to the fiscal laws, as the first-time GST implementation has generated negative ABRs of −0.28% to −0.92%. On the contrary, the Indian equity market responded positively to the latest GST reforms with daily ABRs ranging from 0.20% to 0.35% during the post-event windows. Moreover, the findings also advocate a significant role of industry affiliation in forming the shareholders’ reactions for both event studies. Research limitations/implications The present study, by providing nuanced insights into the stock market assessment of GST laws, explained several implications for industry practitioners and policymakers. However, the current research focused on the immediate market reactions, and further probing is required to unveil the long-term effects of GST regulations. Originality/value Despite the global pervasiveness and multidimensional effects on corporate performance, the value relevance of GST as a fiscal policy measure has largely remained underexplored in the extant literature. Consequently, the present study, to the best of the authors’ knowledge, provides pioneering evidence on the role of GST regulation in the pricing of financial assets.
Khadakbhavi et al. (Tue,) studied this question.