1 How will a New Corporate Tax Policy Affect Stock Markets in Bangladesh? Mizanur Rahman * University of Dhaka Abstract: Bangladesh stock markets experienced an unsustainable bubble and burst in December 2010. Since then the markets observed a falling turnover and a depressed phase of pricing. Millions of small savers lost their savings and the issue became a public policy debacle for the then government. A reduction in corporate tax rates could mean a major stimulus to corporate investments and future profitability. Its effect on stock market performance will be unambiguous and positive. Key words: Corporate tax policy, free cash flows, stock market and stock prices. JEL classification: H25, G01, G32, G35. * Dr. Mizanur Rahman is a Director of Accounting for Capital Market Development (ACMD), a research project of the University Grants Commission of Bangladesh (UGC) and the World Bank and an Associate Professor of Accounting and Public Policy in the University of Dhaka. E-mail: mizan@univdhaka.edu , Tel: +8802 8141849, +88 01817 684202, Fax: +88 02 8615583.