Comparative Analysis of the Effect of Tax Policy on the BIST 100 and Participation 30 Index

Tax policy is one of the most powerful policy options in finance. The effect of tax on asset value can be explained by the concepts of tax capitalization and tax depreciation. The first concept is that the tax increase reduces the price of the relevant asset; The second concept expresses that the tax decrease increases the price of the related asset. For many reasons, stock markets are not able to attract all investments. One of these reasons, the sensitivity to the field of activity of the company to be invested, constitutes the starting point of our study. We think that investors with sensitivity to their field of activity may invest in order to gain dividends rather than capital gains, and therefore they may react to possible changes in the tax levied on dividend distribution. In order to test this argument, in our study, we comparatively examined the effects of the tax regulation dated December 22, 2021 on the share prices of companies included in the Borsa Istanbul 100 and Participation 30 index. We have reached the conclusion that the tax deduction, which is the subject of the review, did not cause a significant change in the stock prices in the BIST 100 index. On the other hand, we found that the same tax change caused a significant change in the stock price of the companies included in the Participation 30 index. In addition, our results showed that the Participation 30 index hasn't a semi-strong form of market efficiency.