Direct Evidence of Dividend Tax Clienteles

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Direct Evidence of Dividend Tax Clienteles

Author Info

Dahlquist, Magnus () (Swedish Institute for Financial Research)
Robertsson, Göran () (Swedish Institute for Financial Research)
Rydqvist, Kristian () (Binghamton University)

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 port-folios 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 private corporations, despite triple taxation at a combined marginal tax rate as high as 77.5%, is a consequence of taxation.

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Paper provided by Swedish Institute for Financial Research in its series SIFR Research Report Series with number 51.

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Length: 34 pages
Date of creation: 15 Mar 2007
Date of revision:
Handle: RePEc:hhs:sifrwp:0051

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Find related papers by JEL classification:
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-04-21 (All new papers)
NEP-CFN-2007-04-21 (Corporate Finance)

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