Dividends and Profits: Some Unsubtle Foreign Influences
AbstractAmerican corporations earn a large and growing share of their profits from their foreign operations. This paper evaluates the effect of foreign earnings on dividend payments by American corporations. The results suggest that the effect may be rather dramatic: that, all other things equal, U.S. corporations pay dividends out of foreign earnings at rates that are three times higher than their payout rates from domestic earnings. Why firms do so is unclear, though this behavior may be consistent with a signaling view of dividends. There is a curious tax consequence of this high payout rate on foreign earnings: the tax system, which grants foreign tax credits to U.S. corporations for the foreign taxes they pay, may receive more revenue from taxing the dividends of U.S. shareholders than from the corporate tax on foreign earnings.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3730.
Date of creation: Jun 1991
Date of revision:
Publication status: published as Journal of Finance, vol. LI, no. 2, pp. 661-689, June 1996.
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
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Other versions of this item:
- Hines, James R, Jr, 1996. " Dividends and Profits: Some Unsubtle Foreign Influences," Journal of Finance, American Finance Association, vol. 51(2), pages 661-89, June.
- Hines Jr., J.R., 1991. "Dividends And Profits: Some Unsubtle Foreign Influences," Papers 77, Princeton, Woodrow Wilson School - John M. Olin Program.
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
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