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Taxes and Company Dividends: A Microeconometric Investigation Exploiting Cross-Section Variation in Taxes

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  • Bond, Stephen R
  • Chennells, Lucy
  • Devereux, Michael P

Abstract

The authors use panel data for 1,218 U.K. industrial and commercial companies between 1970 and 1990 to investigate whether dividends are affected by taxes. Cross-section variation in the tax cost of paying dividends results from surplus advance corporation tax affecting some firms during this period. Observations on firms moving into and out of surplus advanced corporation tax allow them to identify the effect of taxes while controlling for unobserved firm-specific influences. The authors' results suggest that the tax cost has a statistically significant and quantitatively important influence on dividends. Copyright 1996 by Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 106 (1996)
Issue (Month): 435 (March)
Pages: 320-33

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Handle: RePEc:ecj:econjl:v:106:y:1996:i:435:p:320-33

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Cited by:
  1. Philip Bunn & Kamakshya Trivedi, 2005. "Corporate expenditures and pension contributions: evidence from UK company accounts," Bank of England working papers 276, Bank of England.
  2. Andrew Benito & Garry Young, 2002. "Financial Pressure and Balance Sheet Adjustment by UK Firms," Banco de Espa�a Working Papers 0209, Banco de Espa�a.
  3. Renneboog, L.D.R. & Trojanowski, G., 2005. "Patterns in Payout Policy and Payout Channel Choice of UK Firms in the 1990s," Discussion Paper 2005-22, Tilburg University, Center for Economic Research.
  4. Renneboog, Luc & Trojanowski, Grzegorz, 2011. "Patterns in payout policy and payout channel choice," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1477-1490, June.
  5. Oswald, Dennis & Young, Steven, 2008. "Share reacquisitions, surplus cash, and agency problems," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 795-806, May.
  6. Renneboog, L.D.R. & Trojanowski, G., 2005. "Control Structures and Payout Policy," Discussion Paper 2005-61, Tilburg University, Center for Economic Research.
  7. Renneboog, L.D.R. & Szilagyi, P.G., 2006. "How Relevant is Dividend Policy under Low Shareholder Protection?," Discussion Paper 2006-73, Tilburg University, Center for Economic Research.
  8. Andrew Benito & Garry Young, 2001. "Hard Times or Great Expectations?: Dividend omissions and dividend cuts by UK firms," Bank of England working papers 147, Bank of England.
  9. Robin Nuttall, 1999. "An Empirical Analysis of the Effects of the Threat of Takeover on UK Company Performance," Economics Series Working Papers 1999-W05, University of Oxford, Department of Economics.
  10. Weichenrieder, Alfons J., 1998. "Foreign profits and domestic investment," Journal of Public Economics, Elsevier, vol. 69(3), pages 451-463, September.
  11. Frankfurter, George M. & Wood, Bob Jr., 2002. "Dividend policy theories and their empirical tests," International Review of Financial Analysis, Elsevier, vol. 11(2), pages 111-138.
  12. Steve Bond & Lucy Chennells & Michael Devereux, 1995. "Company dividends and taxes in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 16(3), pages 1-18, August.

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