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Title: The effect of personal taxes on investment decisions and stock returns Authors:  Alex Kontoghiorghes - Queen Mary University of London (United Kingdom) [presenting]
Abstract: The aim is to study how the tax rate faced by retail investors for holding publicly listed companies affects the stock demand, stock return, and dividend policy of those companies. A change in legislation in 2013 is exploited which allowed stocks listed on the Alternative Investment Market (AIM), a sub-market of the London Stock Exchange, to be held in capital gains and dividend tax-exempt investment accounts for the first time. After the tax cut, stock demand increased, stock returns decreased, and dividends increased. AIM stocks can also be uniquely exempt from a 40\% inheritance tax. Hence to rationalize results, a life-cycle model is introduced which accounts for different taxes and a bequest motive. The results demonstrate the importance of personal taxes for both investors and companies.