Growth … What growth?

• Published in: Finance research letters Vol. 52; p. 103594
• Main Authors: Tosun, Onur Kemal, Lucey, Brian
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01-03-2023
• Subjects: Economic turmoil; Firm value; Growth; Low-tax policy; Economic turmoil; Firm value; G20; Growth; Low-tax policy; E71; J16
• ISSN: 1544-6123; 1544-6131
• DOI: 10.1016/j.frl.2022.103594

•We study the impact of “low-tax” policy objective by Liz Truss's government.•UK firms lose millions of pounds in stock returns and market value.•Cost of borrowing rises through UK's increased “Moron risk premium”.•The public sentiment on the UK economy worsens.•Tax cuts do not constitute growth during high inflation and political instability.
This study focuses on economic turmoil in the UK between 06September and 19October2022 consequent on a “mini budget” announced by the then Chancellor. Contrary to pre-announcement growth expectations, UK firms lost about 0.30% in daily excess returns and £0.87 million in market value. UK's “Moron Risk Premium” increased by 0.48%. Analyses with Google Search Volume Index support this devastating effect on companies. Durables, construction, manufacturing, and wholesale & retail sectors were less affected by this economic turbulence. We concluded that the announced low-tax economic policy does not always convince markets of future growth, particularly during high inflation and political instability.