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Abstract

Research Question/Issue
This paper studies how corporate investments are affected by financial transaction taxes levied on stock trading and explores alternative corporate governance mechanisms behind the effect.

Research Findings/Insights
Exploiting the 2012 French introduction of a financial transaction tax in a difference-in-differences design, I find an overall positive effect of the tax on corporate investments, namely, capital expenditure and R&D. I also find an improvement in investment sensitivity and an increase in likelihood and quality of acquisitions, particularly among firms for which the tax causes a significant shift from short-term to long-term ownership.

Theoretical/Academic Implications
The evidence suggests that a financial transaction tax could have a positive effect on corporate investments by inducing long-term ownership and alleviating short-termism. The paper therefore addresses one major concern that the tax would hamper investments by increasing costs of capital or harming other governance mechanisms such as exit threats.

Practitioner/Policy Implications
This study provides evidence on economic benefits of financial transaction taxes which are relevant to the debate on the tax introduction and design in many countries.

Publication Type:	Article
Additional Information:	© 2025 The Author(s). Corporate Governance: An International Review published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Publisher Keywords:	corporate governance, corporate investment, cost of capital, financial transaction tax, short-termism
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School Bayes Business School > Faculty of Finance
SWORD Depositor:	Symplectic Administrator

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