Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Effects of Dividend Taxeson Equity Prices

Contents:

Author Info

  • Stephen Bond
  • Alexander Klemm
  • Michael B. Devereux

Abstract

We re-examine the extent to which personal taxes on dividends are capitalized into the equity prices of domestic firms, using data from around the time of the 1997 U.K. dividend tax reform, which removed a significant tax credit for an important group of investors: U.K. pension funds. The tax-adjusted CAPM suggests that the impact should depend on an average of dividend tax rates across all investors, and that U.K. pension funds should reduce their holdings of the previously tax-favored asset: U.K. equities. Given that U.K. pension funds are small relative to the total size of the world capital market, a small open economy-type argument implies that the main effect of the reform would be to reduce U.K. pension funds'' ownership of U.K. equities, with little impact on their price. We present evidence which is consistent with these hypotheses. We discuss why previous research (Bell and Jenkinson, 2002) reached a different conclusion.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21277
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/204.

as in new window
Length: 30
Date of creation: 01 Aug 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/204

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: Tax reforms; Stock prices; Economic models; investors; pension; pension funds; tax rate; tax rates; tax treatment; insurance companies; foreign shareholders; foreign investors; retained earnings; cost of capital; pension providers; tax advantage; tax regime; rate of return; insurance company; pension fund; income tax rate; mutual funds; risk premium; investment decisions; tax revenue; pension plans; institutional investors; domestic investment; tax system; foreign ownership; provision of pension; short selling; individual investor; tax policy; rates of return; interest income; investment trusts; pension fund portfolios; portfolio choice; pension funds insurance; investment behavior; expected returns; expected value; valuation of capital; tax treatments; life insurance; pensions; dividend policy;

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Tobias Lindhe & Jan Södersten, 2012. "The Norwegian shareholder tax reconsidered," International Tax and Public Finance, Springer, vol. 19(3), pages 424-441, June.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:07/204. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.