GST 2025 Reforms and their Impact on Banking Sector Stocks: An Event-Study Analysis of Stock Price Behaviour and Beta Market-Sensitivity

Abstract

Regulatory disclosures relating to tax compliance have increasingly emerged as material information events in financial markets, particularly within highly regulated sectors such as banking. This study investigates the stock market response to Goods and Services Tax (GST) penalty and demand notice disclosures by listed Indian commercial banks during the period 2023–2025. Grounded in the semi-strong form of the Efficient Market Hypothesis, the research examines whether compliance-related tax disclosures convey value-relevant information to investors. An event-study methodology is employed to estimate abnormal returns (ARs) and cumulative abnormal returns (CARs) surrounding disclosure dates identified from mandatory filings made under Regulation 30 of the Securities and Exchange Board of India’s (SEBI) Listing Obligations and Disclosure Requirements (LODR) framework. Expected returns are estimated using the market model with the NIFTY Bank Index as the benchmark. The results indicate a statistically significant negative market reaction around disclosure events, suggesting that investors incorporate GST-related compliance information into security valuations. The findings further indicate that the magnitude of the penalty is associated with the extent of the market response. By providing empirical evidence from the Indian banking sector, the study contributes to the literature on regulatory disclosures, tax compliance, and capital market efficiency, while offering insights into the valuation implications of compliance-related enforcement actions..