BICEPS/SSE Riga Research Seminar: Too Complex to Digest? Federal Tax Bills and Their Processing in US Financial Markets

We invite you to a BICEPS/SSE Riga research seminar, which will take place on Monday, December 5, at SSE Riga, room 411, at 12:00.


We are delighted to welcome Hamza Bennani as the speaker. Hamza is a Professor of economics in the Institute of Economics and Management at Nantes University, and a scientific advisor in the French Council of Economic Analysis (office of the Prime Minister). His research focuses on central bank communication, central bank decision-making process and media economics. His work has been published in journals such as the Journal of International Money and Finance, Economic Modelling and European Journal of Political Economy. Read more about the speaker here.


Speaker: Hamza Bennani (Nantes University, French Council of Economic Analysis)

Title: Too Complex to Digest? Federal Tax Bills and Their Processing in US Financial Markets (co-authored with Matthias Neuenkirch)

Time: Monday, December 5, 12:00

Venue: SSE Riga, room 411



In this paper, we analyze whether the complexity of tax bills affects financial markets. Based on the Flesch-Kincaid grade level of the 32 tax bills identified by Romer and Romer (2010) in the period 1962–2003, we assess the relationship between tax bills’ complexity and financial markets using an event study approach. Our results show a negative (positive) and significant relationship between the present value of tax bills and changes in the 10-year government bond yields (S&P 500 returns). The magnitude of this relationship increases over time, suggesting that market participants underreact at first and need a couple of days to digest the information contained in the tax bills. This delay can be explained by the textual characteristics of the bills in the case of the 10-year yields as a lower readability partly offsets the negative relationship for up to three days after the signing of a tax bill, but not thereafter. In the case of the stock market, we find similar offsetting evidence, but only for a part of the readability measures employed in this paper.


No prior registration for the seminar is necessary. For any questions about the seminar, or if you have a colleague that would like to be added to the distribution list, please write to Nicolas Gavoille.