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The impact of the dividend tax cut and managerial stock holdings on corporate dividend policy

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  • Nam, Jouahn
  • Wang, Jun
  • Zhang, Ge
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    Abstract

    We examine the impact of the May 2003 dividend tax cut and managerial stock holdings on corporate dividend initiation. We find that executives who hold sizable stakes in their companies become more likely to initiate dividends following this tax cut. The firms that initiate dividends after the tax cut are more profitable than firms that initiate dividends before the tax cut. The market appears to recognize the managers' incentive change after the tax law change. Firms with higher managerial stock holdings receive lower abnormal returns from announcing dividend initiation.

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    File URL: http://www.sciencedirect.com/science/article/B6W4F-511R9N3-5/2/839034dd3b8ea4e8b2d1b7412427ab30
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    Bibliographic Info

    Article provided by Elsevier in its journal Global Finance Journal.

    Volume (Year): 21 (2010)
    Issue (Month): 3 ()
    Pages: 275-292

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    Handle: RePEc:eee:glofin:v:21:y:2010:i:3:p:275-292

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    Web page: http://www.elsevier.com/locate/inca/620162

    Related research

    Keywords: Dividend tax cut Managerial stock holdings Dividend initiation;

    References

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    16. Fenn, George W. & Liang, Nellie, 2001. "Corporate payout policy and managerial stock incentives," Journal of Financial Economics, Elsevier, vol. 60(1), pages 45-72, April.
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