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Leverage effect and switching of market efficiency post goods and services tax (GST) imposition


Lee, Yok Yong and Yahya, Mohamed Hisham and Amin Noordin, Bany Ariffin and Selamat, Aslam Izah (2018) Leverage effect and switching of market efficiency post goods and services tax (GST) imposition. International Business Research, 11 (3). pp. 162-178. ISSN 1913-9004; ESSN: 1913-9012


This paper investigates the leverage effect and switching of market efficiency after the GST imposition on fee-based financial services in Bursa Malaysia and Australian Securities Exchange (ASX). The sample in this paper comprises of public listed companies for the period of one year before and after the GST imposition. GJR-GARCH is employed to evaluate the asymmetry response that is associated with the negative news shocks. To assess the effect of transactional efficiency on the informational efficiency and the structural change of time-varying volatility, SGARCH is adopted. This research reveals the presence of leverage effect in developing and developed market. The GST imposition on fee-based financial services significantly reduces the informational efficiency in Bursa Malaysia, but not in ASX. To boost the tax revenues generated from the financial sector, the policymakers in the developed markets (similar to ASX) should contemplate imposing GST on the fee-based financial services without affecting the stability of the stock market. The investors in thin markets (such as Bursa Malaysia) could forecast the stock returns of the thin market upon GST imposition on fee-based financial services.

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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
Putra Business School
DOI Number: https://doi.org/10.5539/ibr.v11n3p162
Publisher: Canadian Center of Science and Education
Keywords: Efficient market hypothesis (EMH); Financial transaction taxes (FTT); Goods and services tax (GST); Leverage effect; Market efficiency; GJR-GARCH; Switching generalized autoregressive conditional heteroscedasticity (SGARCH)
Depositing User: Nabilah Mustapa
Date Deposited: 08 Jul 2019 07:23
Last Modified: 08 Jul 2019 07:23
Altmetrics: http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.5539/ibr.v11n3p162
URI: http://psasir.upm.edu.my/id/eprint/69760
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