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Market-based oil spill(overs): Market reactions to the energy windfall tax announcements and disclosures in the United Kingdom

Author

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  • Allee, Kristian D.
  • Speitmann, Raffael
  • Stenzel, Arthur
  • Wu, Yuchen

Abstract

We investigate the market reaction to a windfall tax regulation announcement for oil and gas firms in the UK. We find that firms subject to the windfall tax experience a significant abnormal price effect of 6.0 to 7.3 %. The effect is concentrated among large and more profitable firms. The results also show that firms voluntarily disclose more precise information after the regulation to offset the negative abnormal price reaction at the windfall tax announcement date. Evidence suggests that these disclosures are largely effective at allaying the price effects associated with increased investor disagreement. Moreover, our analyses show that firms within the same industry experience a negative spillover effect and decreased investor demand associated with heightened policy uncertainty about the implementation of windfall tax regulation. This version: February 2024

Suggested Citation

  • Allee, Kristian D. & Speitmann, Raffael & Stenzel, Arthur & Wu, Yuchen, 2024. "Market-based oil spill(overs): Market reactions to the energy windfall tax announcements and disclosures in the United Kingdom," Economics Letters, Elsevier, vol. 238(C).
    • Handle: RePEc:eee:ecolet:v:238:y:2024:i:c:s0165176524001538
    DOI: 10.1016/j.econlet.2024.111670
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    References listed on IDEAS

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    More about this item

    Keywords

    Windfall tax; Excess profits tax; Oil and gas; Information spillover; Voluntary disclosure;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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