Taxing the Digital Economy: Investor Reaction to the European Commission’s Digital Tax Proposals

This study analyzes investor reaction to the European Commission’s proposals on taxation of digital firms. Examining stock returns potentially affected firms surrounding proposals’ release, we find a significant abnormal capital market −0.692 percent. corresponds an absolute value reduction more than 52 billion euros, 40 percent which is attributable US Investor stronger for that engage in tax avoidance and those with higher Union exposure. Overall, investors perceive event as threat firms’ future profitability react line intentions secure revenues extract location-specific rent.