What question did this study set out to answer?

The aim is to analyze how tax rule changes affect stock market behavior, particularly focusing on banks' interest deductions.

Stock Market Behavior and Tax Rule Changes: The Case of the Disallowance of Certain Interest Deductions Claimed by Banks.

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Examines the wealth effects from tax rule changes on banks, revealing their influence on stock market behavior.

The aim is to analyze how tax rule changes affect stock market behavior, particularly focusing on banks' interest deductions.
Utilized a seemingly unrelated regressions approach to measure cash flow effects.
Investigated information events related to IRS Revenue Procedure 80-55.
Analyzed historical stock market data surrounding the regulatory change.
Significant abnormal return behavior was observed post-announcement of the tax rule change.
The average estimated tax liability for studied banks was $24.2 million, equating to 5.6% of their market value.
Evidence supports that capital market data can help estimate regulatory probability revisions.

Madeo et al. (1985) studied this question.

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