ScholarWorks@숙명여자대학교

초록

A unique feature of capital gains taxation in Korean stock markets is that, for a shareholder to be subject to capital gains taxes, the shareholder’s total value of a listed stock exceeds a certain amount at the end of the previous year of transfer. Consequently, sufficiently forward-looking investors have incentives to adjust their stock holdings just to stay right below the threshold in an effort to avoid any capital gains tax. In this paper, we investigate individual investors’ year-end stock holding patterns in Korean stock markets, finding strong evidence supporting such tax avoidance behaviors. We also discuss two possible sources of economic costs caused by such tax avoidance behaviors: one source through individual investors’ distorted portfolio choices in stock markets, and the other source through ‘big’ minority shareholders’ reduced stock holdings, possibly having their roles curtailed in monitoring controlling shareholders.

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