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Direct Evidence of Dividend Tax Clienteles

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  • Dahlquist, Magnus
  • Robertsson, Göran
  • Rydqvist, Kristian
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    Abstract

    We study a large data set of stock portfolios held by individuals and organizations in the Swedish stock market. The dividend yields on these portfolios are systematically related to investors' relative tax preferences for dividends versus capital gains. Tax-neutral investors earn 40 basis points higher dividend yield on their portfolios than investors which face higher effective taxation of dividends than capital gains. We conclude that there are dividend tax clienteles in the market. We also argue that the abundant portfolio holdings by closely-held corporations, despite triple taxation at a combined marginal tax rate as high as 77.5%, is a consequence of taxation.

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    Bibliographic Info

    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6005.

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    Date of creation: Dec 2006
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    Handle: RePEc:cpr:ceprdp:6005

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    Related research

    Keywords: capital gains tax; dividend tax clienteles; stock ownership; Tax incidence;

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    Cited by:
    1. Lee, King Fuei, 2010. "Retail Minority Shareholders and Corporate Reputation as Determinant of Dividend Policy in Australia," MPRA Paper 23066, University Library of Munich, Germany.
    2. Desai, Mihir A. & Jin, Li, 2011. "Institutional tax clienteles and payout policy," Journal of Financial Economics, Elsevier, vol. 100(1), pages 68-84, April.
    3. Lee, King Fuei, 2013. "Demographics and the long-horizon returns of dividend-yield strategies," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(2), pages 202-218.

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