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Dissertation
The effect of changes in tax structure on the behavior of rational investors in markets for risky assets: an empirical study of the impact of the omnibus budget reconciliation act of 1987 on the investors in publicly traded partnerships
Doctor of Philosophy (Ph.D.), Drexel University
20 Nov 1992
DOI:
https://doi.org/10.17918/00000732
Abstract
This thesis investigates the impact of the Omnibus Reconciliation Act of 1987 (1987 Act) on investors in publicly traded partnerships. Sections 10211 and 10212 of the 1987 Act significantly affected the tax treatment of publicly traded partnerships by enacting Internal Revenue code section 7704 and adding subsection (k) to Section 469. In addition, the Joint Conference Committee changed the treatment of income and loss flowing through a publicly traded partnership. This dissertation is an event study using seemingly unrelated regression (SUR) with regression on dummy variables developed by Zellner (1962). This study extends Zellner's model to allow an analysis of structural changes in the response to the 1987 Act, whereas traditional studies focus only on the immediate reactions. An analysis of abnormal returns is also used to provide additional information to complement the results from the structural change model. The sample used includes firms from several industries (e.g., real estate, oil and gas, cable TV, and hotels and motels). The sample was selected from a list provided by Robert A. Stanger & Co. The results of this dissertation provide empirical evidence that there was a structural change in the behavior of the investors in publicly traded partnerships. In addition, the event date which had the most predictive accuracy was the date the Assistant Secretary of the Treasury testified at the House Ways and Means hearings on partnership taxation. The results also provide evidence of industry differences in the reaction of investors. Oil and gas industry investors were significantly different from all other industries. The most surprising result was that the long-term effect on the market price of a PTP was positive. This result was counter intuitive since the 1987 Act was detrimental to PTP investors' cash flow. This result is explained by the fact that the 1987 Act limited the number of PTPs which retain partnership characteristics for two purposes (i.e., no tax at the entity level). All PTPs formed after December 17, 1987 are taxed as if they were corporations.
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Details
- Title
- The effect of changes in tax structure on the behavior of rational investors in markets for risky assets
- Creators
- Phillip B. Frese
- Contributors
- Brian Greenstein (Advisor)
- Awarding Institution
- Drexel University
- Degree Awarded
- Doctor of Philosophy (Ph.D.)
- Publisher
- Drexel University; Philadelphia, Pennsylvania
- Number of pages
- x, 182 pages
- Resource Type
- Dissertation
- Language
- English
- Academic Unit
- College of Business (and) Administration (1970-1999); Drexel University
- Other Identifier
- 991014970334004721