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BEGIN:VEVENT
UID:451d8a972effa6bc5e2a3bb03d338b2c
CATEGORIES:Lecture / Reading / Talk
CREATED:20211120T121114
SUMMARY:"Stock Market Reactions to India's 2016 Demonetization: Implications for Tax Evasion, Corruption, and Financial Constraints" - A Talk by Vikramaditya Khanna, William W. Cook ( University of Michigan)
LOCATION:Ramanujan 002
DESCRIPTION:Abstract:On November 8, 2016, the Indian government made a surprise announc
 ement that certain currency notes (representing 86% of the currency then in
  circulation) would no longer be legal tender (although they could be depos
 ited in banks over a limited period). The stated reason for this sudden “de
 monetization” was to combat tax evasion and corruption associated with “una
 ccounted-for” cash. We compute abnormal returns for firms on the Indian sto
 ck market around this event, and compare patterns of abnormal returns for d
 ifferent subsamples of firms defined by industry, ownership structure, and 
 other characteristics. There is little evidence that sectors thought to be 
 associated with greater tax evasion or corruption experienced significantly
  different returns. However, we find substantial positive returns for banks
  and for state owned enterprises (SOEs), implying market expectations that 
 are puzzling in some respects, especially as the initial reactions do not s
 how any evidence of reversal in the five months following the event. The ba
 nk results appear to indicate a market expectation of a persistent increase
  in financial depth. We also find a pattern of higher returns for industrie
 s that are characterized by a greater dependence on external finance, possi
 bly suggesting an expectation of an easing of financial constraints. The re
 turns for SOEs may be due to possible indirect effects of the announcement 
 on perceptions of future corruption among these firms.\n
X-ALT-DESC;FMTTYPE=text/html:<p>Abstract:On November 8, 2016, the Indian government made a surprise anno
 uncement that certain currency notes (representing 86% of the currency then
  in circulation) would no longer be legal tender (although they could be de
 posited in banks over a limited period). The stated reason for this sudden 
 “demonetization” was to combat tax evasion and corruption associated with “
 unaccounted-for” cash. We compute abnormal returns for firms on the Indian 
 stock market around this event, and compare patterns of abnormal returns fo
 r different subsamples of firms defined by industry, ownership structure, a
 nd other characteristics. There is little evidence that sectors thought to 
 be associated with greater tax evasion or corruption experienced significan
 tly different returns. However, we find substantial positive returns for ba
 nks and for state owned enterprises (SOEs), implying market expectations th
 at are puzzling in some respects, especially as the initial reactions do no
 t show any evidence of reversal in the five months following the event. The
  bank results appear to indicate a market expectation of a persistent incre
 ase in financial depth. We also find a pattern of higher returns for indust
 ries that are characterized by a greater dependence on external finance, po
 ssibly suggesting an expectation of an easing of financial constraints. The
  returns for SOEs may be due to possible indirect effects of the announceme
 nt on perceptions of future corruption among these firms.</p>
DTSTAMP:20260905T191948
DTSTART;TZID=Asia/Kolkata:20171211T100000
DTEND;TZID=Asia/Kolkata:20171211T110000
SEQUENCE:0
TRANSP:OPAQUE
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