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Time to Transfer the Profits to Salmon Else? An emperical analysis of the stock market’s reaction to the announced resource rent tax on Norwegian aquaculture

Grythe, Fredrik Underhaug; Holtan, Vetle Gaugstad
Master thesis
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URI
https://hdl.handle.net/11250/3050569
Date
2022
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  • Master Thesis [4657]
Abstract
On the 28thof September 2022, the Norwegian Government announced a proposal for resource

rent taxation on the Norwegian fish farming industry. This thesis examines the Norwegian

stock market's reactions to the proposal to raise awareness of its financial implications. These

implications are answered using the event study methodology described byMacKinlay (1997).

The sample consists of five salmon farming companies listed on the Oslo Stock Exchange,

where all the companies are directly impacted by the implementation of resource rent tax.

The primary objective is to identify if the resource rent tax announcement leads to a cumulative

abnormal return significantly different from zero on the event day and in our main event

window [-5, 5]. In addition, the thesis will investigate if there are signs of information leakage

prior to the announcement and examine if there are any post-event price drifts. We will also

attempt to determine how operational and financial flexibility affect the stock market's

response.

The analysis finds a cumulative abnormal return of -27.60% on the event day. The steep cliff

shows that the market instantly changes the fish farming companies' valuation following

receiving the information about the resource rent tax. In the main event window [-5, 5], we

find a cumulative abnormal return of -44.03%. This cumulative abnormal return is distributed

between the pre-event and post-event window. In the pre-event window [-5, -l], we find a

cumulative abnormal return of -8.47%. Our findings could indicate information leakage prior

to the event, but that would only be speculation. However, in the post-event window [ l , 5],

we find a cumulative abnormal return of -7.96%, and we notice a price drift after the 28th of

September 2022. All cumulative abnormal returns mentioned above are calculated using the

market model and are significantly different from zero on all conventional levels.

To measure operational flexibility, we have used harvested volume in Norway as a ratio of the

total harvested volume. We identified a trend towards a higher concentration of harvested

volume in Norway, resulting in a lower cumulative abnormal return. Further, to measure

financial flexibility, we use a net debt to assets ratio. Also, here, we identified a trend towards

a higher net debt to assets ratio resulting in a lower cumulative abnormal return. However, the

results should be interpreted with caution due to the small sample size in our research.

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