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Income Taxation Regulation And Companies’ Behaviour: Is The Romanian Companies’ Dividend Policy Influenced By The Changes In Income Taxation?

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Author Info
Dragota, Mihaela () (Department of Finance, Academy of Economic Studies, Bucharest, Romania)
Dragota, Victor () (Department of Finance, Academy of Economic Studies, Bucharest, Romania)
Tatu, Lucian () (Department of Finance, Academy of Economic Studies, Bucharest)
Tatu, Delia () (Department of Economics, Academy of Economic Studies, Bucharest)

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Abstract

This paper analyzes the dividend payout by Romanian companies listed on the Bucharest Stock Exchange in connection with the changes in corporate taxes. If the tax burden on corporate gross incomes is increasing, the companies’ management can follow two reasons in deciding the dividend payout: to allocate more for investments, or to increase the dividend ratio. Each of these decisions can be argued based on Corporate Finance principles, depending on the management objectives. This paper found no significant correlation between the dividend policy and the corporate tax burden. However, the dividend payout reacted when the regulations related to the tax treatment of incomes were changed in 2005. Moreover, the dividend policy seems to be sensitive to the ownership structure, which can be explained by the impact of some agency problems.

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Publisher Info
Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): 6 (2009)
Issue (Month): 1 (March)
Pages: 76-93
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Handle: RePEc:rjr:romjef:v:6:y:2009:i:1:p:76-93

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Related research
Keywords: dividend payout; taxation; agency problem; emergent markets;

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Find related papers by JEL classification:
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

References listed on IDEAS
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  7. Crockett, Jean A & Friend, Irwin, 1988. "Dividend Policy in Perspective: Can Theory Explain Behavior?," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 603-13, November. [Downloadable!] (restricted)
  8. James M. Poterba & Lawrence H. Summers, 1985. "The Economic Effects of Dividend Taxation," NBER Working Papers 1353, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Blume, Marshall E, 1980. "Stock Returns and Dividend Yields: Some More Evidence," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 567-77, November. [Downloadable!] (restricted)
  10. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
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  11. Miller, Merton H & Scholes, Myron S, 1982. "Dividends and Taxes: Some Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1118-41, December. [Downloadable!] (restricted)
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