The Effect of the Tax Subsidy on the Trading Volume

The purpose of this study is to analyze the hypothesis that trading volume will decrease as tax subsidy increases. This study conducted a hypothesis and empirical analysis based on the expectation that if the tax subsidies act as an incentive for downward earnings management and conservatism accounting, the different beliefs among investors about the intrinsic value of the investment target firm will decrease. As a result of the tests, the regression coefficient of the measure of tax subsidy is a negative value. It can be interpreted that the trading volume decreases as the tax subsidy increases. In addition, this suggests that the tax subsidy is improving the information environment by acting as a factor in downward earnings management. This study will contribute to the analysis of how individual investors understand tax subsidies. The results of this study provide implications that national tax subsidies may also affect firms’ accounting information.