Discussion by Mikhail Stolbov (MGIMO-University) Jean Pierre Fraichot Study of The Effect of a Financial Transaction Tax on the Corporate Cost of Capital Discussion by Mikhail Stolbov (MGIMO-University)

Motivation and strong points of the paper A burning issue for the EU financial regulation Relatively few experimental and calibration studies, examining the issue The author assesses the impact of the financial transaction tax (FTT) against the backdrop of a possible capital structure arbitrage Interesting calibration results (the effect of the tax is conditional on the liquidity of financial instruments and balance sheet indicators) Overall, the magnitude of the FTT effect is likely to be stronger in terms of capital cost than its promoters believe

Possible extensions Why not organize a literature review section or extend the introduction? The contribution of the paper needs to be properly placed into the context of (a) certain strand(-s) of literature; Country-level experiences (France, Italy) with the tax levied on stocks need to be mentioned (Meyer et al., 2015; Hvozdyuk and Rustanov, 2016). Is it possible to consider more than 6 corporations, when considering the implications of the FTT for the CDS market? For example, other European banks from the SIFI list

Possible extensions It is stated that the FTT tax can increase corporate bond yields via the CDS market because of “basis arbitrage”. Will this impact necessarily be significant? Price discovery running from the CDS to bond market needs not be taken for granted. It may equally occur in the opposite direction for some entities Does the presence of a market-maker matter? Kirchler et al. (2011) show that the FTT is more beneficial and less distortionary when a market-maker on the buyer side is present since it deters liquidity evaporation. If the proposed FTT scheme (standard transaction excise tax) may have strong distortionary effects, which institutional design is better? Market or residence approach, or a combination of both? (e.g. Huber et al., 2014)