Unexpected tax refunds and capital market efficiency: Evidence from the German nuclear fuel tax

We investigate the efficiency of capital markets in reacting to a ruling of the German Constitutional Court in 2017, which led to a large unexpected tax refund for the three German-based operators of nuclear power plants. Unlike events used by prior research, this unique firm-specific event allows us to assess both, the magnitude and speed of the market reaction. With regard to magnitude, we find that the tax refund is fully impounded into stock prices within a few trading days after the court ruling. When investigating the speed of the market reaction more granularly, we show that 63% to 82% of the entire abnormal returns of the event date are already realized within the first minute after the announcement of the court ruling and, moreover, that significant market reactions occur even within 5 to 15 s.