Tax clientele effects of dividends under intertemporal consumption choices
AbstractCorporate investors putatively seek high dividends because marginal tax rates on dividends are lower than those on capital gains. However, a lower tax "rate" does not necessarily mean that a higher dividend is desirable. Taking the intertemporal consumption choices given, corporate investors are expected to prefer "time-preference-fitted dividends" if tax rates remain constant over time; otherwise they confront a larger "amount" of tax obligation. If dividend shortfalls exist, they must realize capital gains and thereby suffer unfavorable tax treatment, whereas excessive payments cause intertemporal double taxation on reinvested dividends. Tax-saving problems should be linked with intertemporal consumption choices.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 34 (2010)
Issue (Month): 5 (May)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jbf
Tax clientele effect Optimal dividends Corporate investors Payout policy;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Scholz, John Karl, 1992. "A direct examination of the dividend clientele hypothesis," Journal of Public Economics, Elsevier, vol. 49(3), pages 261-285, December.
- Alon Brav & John R. Graham & Campbell R. Harvey & Roni Michaely, 2003.
"Payout Policy in the 21st Century,"
NBER Working Papers
9657, National Bureau of Economic Research, Inc.
- Allen, Franklin & Michaely, Roni, 2003.
Handbook of the Economics of Finance,
in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 7, pages 337-429
- DeAngelo, Harry, 1991. " Payout Policy and Tax Deferral," Journal of Finance, American Finance Association, vol. 46(1), pages 357-68, March.
- King, Mervyn A, 1974. "Taxation and the Cost of Capital," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 21-35, January.
- Ferris, Stephen P. & Jayaraman, Narayanan & Sabherwal, Sanjiv, 2009. "Catering effects in corporate dividend policy: The international evidence," Journal of Banking & Finance, Elsevier, vol. 33(9), pages 1730-1738, September.
- Bruno Parigi & Loriana Pelizzon, 2005.
"Diversification and ownership concentration,"
"Marco Fanno" Working Papers
0005, Dipartimento di Scienze Economiche "Marco Fanno".
- Loriana Pelizzon & Bruno Maria Parigi, 2007. "Diversification and Ownership Concentration," Working Papers 2007_29, Department of Economics, University of Venice "Ca' Foscari".
- Bruno Maria Parigi & Loriana Pelizzon, 2005. "Diversification and Ownership Concentration," CESifo Working Paper Series 1590, CESifo Group Munich.
- DeAngelo, Harry & Masulis, Ronald W, 1980. " Leverage and Dividend Irrelevancy under Corporate and Personal Taxation," Journal of Finance, American Finance Association, vol. 35(2), pages 453-64, May.
- Malcolm Baker & Jeffrey Wurgler, 2004.
"A Catering Theory of Dividends,"
Journal of Finance,
American Finance Association, vol. 59(3), pages 1125-1165, 06.
- Black, Fischer & Scholes, Myron, 1974. "The effects of dividend yield and dividend policy on common stock prices and returns," Journal of Financial Economics, Elsevier, vol. 1(1), pages 1-22, May.
- Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411.
- Holmen, Martin & Knopf, John D. & Peterson, Stefan, 2008. "Inside shareholders' effective tax rates and dividends," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1860-1869, September.
- J. Hirshleifer, 1958. "On the Theory of Optimal Investment Decision," Journal of Political Economy, University of Chicago Press, vol. 66, pages 329.
- Mihir A. Desai & Li Jin, 2007. "Institutional Tax Clienteles and Payout Policy," NBER Working Papers 13283, National Bureau of Economic Research, Inc.
- Michael J. Barclay & Clifford G. Holderness & Dennis P. Sheehan, 2009. "Dividends and Corporate Shareholders," Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2423-2455, June.
- Higgins, Robert C., 1972. "Dividend Policy and Increasing Discount Rates: A Clarification," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(03), pages 1757-1762, June.
- Chae, Joon & Kim, Sungmin & Lee, Eun Jung, 2009. "How corporate governance affects payout policy under agency problems and external financing constraints," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 2093-2101, November.
- Jain, Ravi, 2007. "Institutional and individual investor preferences for dividends and share repurchases," Journal of Economics and Business, Elsevier, vol. 59(5), pages 406-429.
- Lewellen, Wilbur G, et al, 1978. "Some Direct Evidence on the Dividend Clientele Phenomenon," Journal of Finance, American Finance Association, vol. 33(5), pages 1385-99, December.
- Pettit, R. Richardson, 1977. "Taxes, transactions costs and the clientele effect of dividends," Journal of Financial Economics, Elsevier, vol. 5(3), pages 419-436, December.
- Yaniv Grinstein & Roni Michaely, 2005. "Institutional Holdings and Payout Policy," Journal of Finance, American Finance Association, vol. 60(3), pages 1389-1426, 06.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.