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Dissecting dividend decisions: some clues about the effects of dividend taxation from recent UK reforms

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Author Info
Steve Bond () (Institute for Fiscal Studies and Nuffield College, Oxford)
Michael Devereux () (Institute for Fiscal Studies and University of Oxford)
Alexander Klemm () (Institute for Fiscal Studies)

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Abstract

We present empirical evidence which suggests that a big increase in dividend taxation for UK pension funds in July 1997 affected the form in which some UK companies chose to make dividend payments, but otherwise had limited effects on both the level of dividend payments and the level of investment. These findings are consistent with a version of the 'new view' of dividend taxation. We also identify a group of firms whose dividend choices are difficult to reconcile with (stock market) value maximisation.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W05/17.

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Length: 50 pp.
Date of creation: Aug 2005
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Handle: RePEc:ifs:ifsewp:05/17

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References listed on IDEAS
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.:
  1. Alan J. Auerbach & Kevin A. Hassett, 2000. "On the Marginal Source of Investment Funds," NBER Working Papers 7821, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. King, Mervyn A, 1974. "Taxation and the Cost of Capital," Review of Economic Studies, Blackwell Publishing, vol. 41(1), pages 21-35, January. [Downloadable!] (restricted)
  3. Devereux, Michael P. & Keen, Michael & Schiantarelli, Fabio, 1994. "Corporation tax asymmetries and investment : Evidence from U.K. panel data," Journal of Public Economics, Elsevier, vol. 53(3), pages 395-418, March. [Downloadable!] (restricted)
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  4. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Stephen Bond & Alexander Klemm & Rain Newton-Smith & Murtaza Syed & Gertjan Vlieghe, . "The roles of expected profitability, Tobin's Q and cash flow in econometric models of company investment," Bank of England working papers 222, Bank of England. [Downloadable!]
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  6. Hayashi, Fumio, 1985. "Corporate finance side of the Q theory of investment," Journal of Public Economics, Elsevier, vol. 27(3), pages 261-280, August. [Downloadable!] (restricted)
  7. Steve Bond & Jason Cummins, 2001. "Noisy share prices and the Q model of investment," IFS Working Papers W01/22, Institute for Fiscal Studies. [Downloadable!]
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  1. Seppo Kari & Hanna Karikallio & Jukka Pirttilä, 2008. "Anticipating Tax Change: Evidence from the Finnish Corporate Income Tax Reform of 2005," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  2. Alexander Klemm, 2006. "Allowances for Corporate Equity in Practice," IMF Working Papers 06/259, International Monetary Fund. [Downloadable!]
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