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The Sectoral Effects of Value-Added Tax: Evidence from UAE Stock Markets

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  • Anagha Ann Gopakumar

    (Faculty of Business, University of Wollongong in Dubai, Dubai P.O Box 20183, United Arab Emirates)

  • Avneet Kaur

    (Faculty of Business, University of Wollongong in Dubai, Dubai P.O Box 20183, United Arab Emirates)

  • Vikash Ramiah

    (Faculty of Business, University of Wollongong in Dubai, Dubai P.O Box 20183, United Arab Emirates)

  • Krishna Reddy

    (Postgraduate Business, Faculty of Business, Design, and Services Industries, Toi Ohomai Institute of Technology/Te Poking, Rotorua 3046, New Zealand)

Abstract

This paper investigates the impact of 19 announcements pertaining to the introduction of value-added tax (VAT) in the United Arab Emirates (UAE) on equities listed on the Abu Dhabi Stock Exchange (ADX). Using a well-established event study methodology over the period 2015 to 2018, a sector-wise assessment of the value constructiveness or destructiveness of these announcements is conducted. In addition, an estimation of sector-wise changes in systematic risk following these announcements is provided. Significant sectoral differences in abnormal returns are observed with industries such as insurance and retail showing higher sensitivity. Certain announcements are identified as exerting more impact than others. The results document the outcome of the implementation of VAT and provide guidance to other countries in the Gulf region that plan to introduce VAT.

Suggested Citation

  • Anagha Ann Gopakumar & Avneet Kaur & Vikash Ramiah & Krishna Reddy, 2022. "The Sectoral Effects of Value-Added Tax: Evidence from UAE Stock Markets," JRFM, MDPI, vol. 15(10), pages 1-16, September.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:10:p:429-:d:925809
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    References listed on IDEAS

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    2. Jorge Martinez-Vazquez & Violeta Vulovic & Yongzheng Liu, 2011. "Direct versus Indirect Taxation: Trends, Theory, and Economic Significance," Chapters, in: Emilio Albi & Jorge Martinez-Vazquez (ed.), The Elgar Guide to Tax Systems, chapter 2, Edward Elgar Publishing.
    3. Ramiah, Vikash & Martin, Belinda & Moosa, Imad, 2013. "How does the stock market react to the announcement of green policies?," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1747-1758.
    4. Alex Ufier, 2014. "Quasi-Experimental Analysis On The Effects Of Adoption Of A Value Added Tax," Economic Inquiry, Western Economic Association International, vol. 52(4), pages 1364-1379, October.
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