An Empirical Research On Securities Transaction Stamp Duty And Stock Market Quality

It has been ten years since the Ministry of Finance announced the reduction of stamp duty in September 2008.Although the stamp duty has never changed in the past decades,the market's call to cancel the stamp duty has not been interrupted.China's capital market is currently in a period of historical downturn,and the market's call for the abolition of stamp duty is growing.Many people have called for a reduction or cancellation of stamp duty to restart confidence in the capital markets.By consulting the literature,we found that the adjustment of stamp duty on all securities transactions has had a huge impact on China's stock market.Whenever the stamp duty is announced to rise,the market index will fall,and when the stamp duty is announced to decrease,the market index will rise the next day.This shows that the securities market environment has a great correlation with the stamp duty policy,and the impact of stamp duty on the securities market is positive or negative,and the academic community has not given a unified conclusion.Some scholars believe that raising the stamp duty on securities transactions can increase government tax revenues and reduce the frequency of unstable speculative transactions by “sprinkling a handful of sand on the spinning wheels” to limit excessive market volatility.Opponents of stamp duty on securities transactions believe that stamp duty can hurt market quality by reducing transaction volume and increasing price volatility,resulting in inefficient price discovery.We studied the changes in the quality of the stock market brought about by the seven adjustments to the stamp duty on securities transactions from 1997 to 2008,while the main indicators for measuring market quality were market volatility and liquidity.We use the standard deviation of stock returns as an indicator of market volatility.The empirical results show that stamp duty on securities transactions has a significant positive impact on market volatility,both in the short-term and long-term.That is,the increase in stamp duty will lead to an increase in market volatility;the decline in stamp duty will lead to a reduction in market volatility.From the two perspectives of turnover rate and Amihud(2002)Non-flow factor,we study the impact of stamp duty on securities trading on market liquidity.The empirical results show that the stamp duty of securities transactions has a significant inverse relationship with market flows,the increase in stamp duty will lead to a decrease in market liquidity;the decline in stamp duty will lead to an increase in market liquidity.We used the relevant ideas of Fama-MacBeth,averaged the regression coefficients of each stock,and calculated the corresponding T values to observe the significance of the regression coefficients.We conducted a test of the robustness of the stamp duty and the short-term effects of the market,the stamp duty and the long-term effects of the market,the stamp duty and the turnover rate.The results show that our regression conclusions are robust.At the end of this paper,based on the similarities and differences between the development of stamp duty in China and mature market countries,and our empirical conclusions,we put forward policy recommendations in line with China's national conditions: Reduce the stamp tax on securities transactions and enhance the competitiveness of the financial market;Consider introducing differential stamp duty on securities transactions;Further improve the market mechanism and strengthen investor education.