The Impact Of The Adjustment Of The Stamp Duty Rate On Securities Transactions On The Liquidity Of China’s Stock Market

As the main tax in China’s stock market, Stamp duty on securities transactions had been adjusted for 13 times in less than 25 years since China’s stock market exists. Each adjustment would have a wide range of effects on the stock market. Using the theoretical and the empirical methods, this dissertation will focus on the impact of the adjustment of the Stamp duty rate on securities transactions on the liquidity of China’s stock market.In the theoretical analysis, the function theory and the policy transmission mechanism of Stamp duty on securities transactions will be introduced. The concept and the influencing factors of the liquidity of stock market will also be introduced in this part. In the empirical analysis, the latest two stamp duty rate adjusting events are chosen as the target events. Based on the data of Shanghai Stock Exchange, the event study method and regression analysis will be used to study the impact of the two target events on the liquidity of Shanghai stock market. And then assuming the turnover rate of a stock could indicate its level of speculation, a high speculative stocks sample and a low speculative stocks sample are built to discover the differences of the impacts of the two target events on these two stock samples’liquidity. And the preliminary conclusions are as follows.On the one hand, the two target events both achieved the expected policy effects on the liquidity of the stock market. When the stamp duty rate gets higher, the level of liquidity will get lower significantly; when the stamp duty rate gets lower, the level of liquidity will get higher significantly.On the other hand, when the stamp duty rate gets higher, the high speculative sample’s liquidity level will significantly get lower, but the low speculative sample’s liquidity level will remain the same; when the stamp duty rate gets lower, both the high and the low speculative samples’liquidity level will significantly get higher.In the last part of this dissertation, according to the conclusions and the problems of the current stamp duty policy, we made the following policy recommendations. First, stamp duty policy should be relatively stable. Second, stamp duty policy could be a very useful policy tool for regulating the stock market when it is necessary.