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Tax reform and payout policy: Do shareholder clienteles or payout policy adjust?

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Author Info

  • Korkeamaki, Timo
  • Liljeblom, Eva
  • Pasternack, Daniel

Abstract

Changes in taxation of corporate dividends offer excellent opportunities to study dividend clientele effects. We explore payout policies and ownership structures around a major tax reform that took place in Finland in 2004. Consistent with dividend clienteles affecting firms' dividend policy decisions, we find that Finnish firms altered their dividend policies based on the changed tax incentives of their largest shareholders. While firms adjust their payout policies, our results also indicate that ownership structures of Finnish firms also changed around the 2004 reform, consistent with shareholder clienteles adjusting to the new tax system.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 16 (2010)
Issue (Month): 4 (September)
Pages: 572-587

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Handle: RePEc:eee:corfin:v:16:y:2010:i:4:p:572-587

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Web page: http://www.elsevier.com/locate/jcorpfin

Related research

Keywords: Tax reform Dividends Share repurchases Ownership clienteles;

References

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Citations

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Cited by:
  1. Liljeblom, Eva & Pasternack, Daniel & Rosenberg, Matts, 2011. "What determines stock option contract design?," Journal of Financial Economics, Elsevier, vol. 102(2), pages 293-316.
  2. Seppo Kari & Jarkko Harju, 2011. "Dividend taxes and decisions of MNEs: Evidence from a Finnish tax reform," Working Papers 27, Government Institute for Economic Research Finland (VATT).
  3. Annette Alstadsæter & Wojciech Kopczuk & Kjetil Telle, 2013. "Are Closely-Held Firms Tax Shelters?," NBER Chapters, in: Tax Policy and the Economy, Volume 28 National Bureau of Economic Research, Inc.
  4. Henry, Darren, 2011. "Ownership structure and tax-friendly dividends," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2747-2760, October.
  5. Khamis Hamed Al-Yahyaee & Toan Pham & Terry Walter, 2010. "Dividend stability in a unique environment," Managerial Finance, Emerald Group Publishing, vol. 36(10), pages 903-916, October.
  6. Boulton, Thomas J. & Braga-Alves, Marcus V. & Shastri, Kuldeep, 2012. "Payout policy in Brazil: Dividends versus interest on equity," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 968-979.
  7. Jacob, Martin, 2010. "Taxation, Dividends, and Share Repurchases: Taking Evidence Global," Working Paper Series, Center for Fiscal Studies 2010:10, Uppsala University, Department of Economics.

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