Abstract Using an "events" methodology, this study analyzed the market impact of possessions corporation (PC) tax changes enacted by the Tax Equity and Fiscal Responsibility Act of 1982. Three announcement dates relevant to proposed PC revisions were identified, and three sets of analyses were conducted; an assessment of the security market effect of the PC announcements, an examination of the sensitivity of sample companies to the PC changes, and an estimation of dollar revenue generated by the revisions. The results indicated a significant impact in the expects direction for all announcements, a significant relationship between a company's cumulative market reaction and its previous use of PC benefits, and a dollar estimate slightly smaller than the Treasury's. These conclusions have implications for policy makers in their assessment of the impact of proposed tax changes, while the methodological refinements are relevant to academic researchers considering a similar design.
Manegold et al. (Tue,) studied this question.