Politically induced uncertainty and asset-market valuation

We study the consequences of politically induced asset-market uncertainty. Our data are from Poland, where the imposition of a new resource tax was vaguely announced in a single sentence by the prime minister in November 2011. The tax concerned a single company, one of the world's leading copper and silver producers. We show how the announcement, besides imposing losses as expected on shareholders, introduced uncertainty into asset-market valuation. •We show that stock markets can react even to very evasive political announcements.•We focus on the new tax vaguely announced by the Polish prime minister in Nov. 2011.•We look at stock prices of Polish KGHM, one of the worlds' leading copper producers.•We document huge negative abnormal returns for KGHM due to the tax announcement.•We argue that the initial underreaction by investors was due to uncertainty.