Did Firms Substitute Dividends for Share Repurchases after the 2003 Reductions in Shareholder Tax Rates?
AbstractThis paper tests whether firms altered their dividend and share repurchase policies in response to the 2003 reductions in shareholder tax rates. We predict that firms substituted dividends for repurchases, because the reduction in dividend tax rates exceeded the reduction in the capital gains tax rates. As expected, we find substitution and find that it is increasing in the percentage of the company owned by individual investors, the only shareholders affected by the legislation. These findings are consistent with boards of directors considering the tax preferences of individual stockholders (particularly officers and managers) when setting dividend and share repurchase policies.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13601.
Date of creation: Nov 2007
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Publication status: published as Article Citation: Jennifer L. Blouin, Jana S. Raedy, and Douglas A. Shackelford (2011) Dividends, Share Repurchases, and Tax Clienteles: Evidence from the 2003 Reductions in Shareholder Taxes. The Accounting Review: May 2011, Vol. 86, No. 3, pp. 887-914.
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Find related papers by JEL classification:
- G3 - Financial Economics - - Corporate Finance and Governance
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
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