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The Evolution of Aggregate Stock Ownership - A Unified Explanation

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  • Rydqvist, Kristian

    ()
    (Binghamton University)

  • Spizman, Joshua

    ()
    (Binghamton University)

  • Strebulaev, Ilya

    ()
    (Stanford University)

Abstract

Since World War II, direct stock ownership by households has largely been replaced by indirect stock ownership by financial institutions. We argue that tax policy is the driving force. Using long time-series from eight countries, we show that the fraction of household ownership decreases with measures of the tax benefits of holding stocks inside a pension plan. This finding is important for policy considerations on effctive taxation and for financial economics research on the long-term effects of taxation on corporate finance and asset prices.

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Bibliographic Info

Paper provided by Institute for Financial Research in its series SIFR Research Report Series with number 68.

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Length: 53 pages
Date of creation: 15 Sep 2009
Date of revision:
Handle: RePEc:hhs:sifrwp:0068

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Related research

Keywords: Capital gains tax; income tax; stock ownership; inflation; bracket creep; pension funds;

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  1. Kenneth R. French, 2008. "Presidential Address: The Cost of Active Investing," Journal of Finance, American Finance Association, vol. 63(4), pages 1537-1573, 08.
  2. Eugene F. Fama & Kenneth R. French, 2002. "The Equity Premium," Journal of Finance, American Finance Association, vol. 57(2), pages 637-659, 04.
  3. Chetty, Raj & Saez, Emmanuel, 2004. "Dividend Taxes and Corporate Behaviour: Evidence from the 2003 Dividend Tax Cut," CEPR Discussion Papers 4722, C.E.P.R. Discussion Papers.
  4. Valery Polkovnichenko, 2005. "Household Portfolio Diversification: A Case for Rank-Dependent Preferences," Review of Financial Studies, Society for Financial Studies, vol. 18(4), pages 1467-1502.
  5. Julian Franks & Colin Mayer & Hannes Wagner, 2006. "The Origins of the German Corporation - Finance, Ownership and Control," Review of Finance, European Finance Association, vol. 10(4), pages 537-585, December.
  6. Green, Richard C. & Hollifield, Burton, 2003. "The personal-tax advantages of equity," Journal of Financial Economics, Elsevier, vol. 67(2), pages 175-216, February.
  7. J. B. Chay & Dosoung Choi & Jeffrey Pontiff, 2006. "Market Valuation of Tax-Timing Options: Evidence from Capital Gains Distributions," Journal of Finance, American Finance Association, vol. 61(2), pages 837-865, 04.
  8. Lakonishok, Josef & Vermaelen, Theo, 1983. " Tax Reform and Ex-Dividend Day Behavior," Journal of Finance, American Finance Association, vol. 38(4), pages 1157-79, September.
  9. Ishi, Hiromitsu, 2001. "The Japanese Tax System," OUP Catalogue, Oxford University Press, edition 3, number 9780199242566.
  10. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
  11. Clemens Sialm, 2009. "Tax Changes and Asset Pricing," American Economic Review, American Economic Association, vol. 99(4), pages 1356-83, September.
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Cited by:
  1. Greenwood, Robin & Thesmar, David, 2011. "Stock price fragility," Journal of Financial Economics, Elsevier, vol. 102(3), pages 471-490.
  2. Henrekson, Magnus & Stenkula, Mikael, 2009. "Entrepreneurship and Public Policy," Working Paper Series 804, Research Institute of Industrial Economics.
  3. Henrekson, Magnus & Johansson, Dan & Stenkula, Mikael, 2010. "Taxation, Labor Market Policy and High-Impact Entrepreneurship," Ratio Working Papers 149, The Ratio Institute.
  4. Magnus Henrekson & Tino Sanandaji, 2011. "Entrepreneurship and the theory of taxation," Small Business Economics, Springer, vol. 37(2), pages 167-185, September.

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