Did Dividends Increase Immediately After the 2003 Reduction in Tax Rates?
AbstractThe Jobs and Growth Tax Relief Reconciliation Act of 2003 reduces the maximum statutory personal tax rate on dividends from 38.1 percent to 15 percent. This study analyzes dividend declarations in the quarter following passage. Aggregate dividends rose by 9 percent when boards of directors first met following enactment. Consistent with the dividend changes being tax-motivated, they are increasing in the percentage of the firm held by individuals. Dividend changes also increased with insider ownership, consistent with managers acting in their own interests. However, these results are limited primarily to firms that made large, special dividends. We find little evidence of an increase in regular, quarterly dividend payments.
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Date of creation: Feb 2004
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Find related papers by JEL classification:
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-15 (All new papers)
- NEP-CFN-2004-02-15 (Corporate Finance)
- NEP-PBE-2004-02-15 (Public Economics)
- NEP-PUB-2004-02-15 (Public Finance)
- NEP-RMG-2004-02-15 (Risk Management)
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