Abstract
Following the Sharia law, the government of Saudi Arabia is responsible to administer land efficiently and fairly according to God's laws. Unlike other countries, the white land tax of 2.5% has been introduced and targeted to the undeveloped land in the urban areas. Notably, it acts as a fee or penalty to the landowners for not developing the land. This study is motivated to provide some evidence by discovering how the market reacts to the announcement of white land tax during the short-run period. Using the market-adjusted return model, evidence indicates that real estate development and construction companies significantly underperformed both equal-weighted and value-weighted market benchmarks during few days surrounding the announcement date. The results imply that investors show less favourable reactions to such event. The results also contribute to evident that indication of size effects are seen in difference results when this study switches from equal-weighted to value weighting.