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The dividend puzzle and tax: a note

Author

Listed:
  • Frank Strobel

    (University of Birmingham)

Abstract

The dividend puzzle, where consumers prefer capital gains to dividends due to differences in taxation, is examined in a two-period general equilibrium model with heterogeneous agents. Stressing the importance of interfirm equity holdings and their tax treatment, different scenarios where dividends are paid to some or all consumers in equilibrium are exposed, giving rise to the potential formation of tax clienteles.

Suggested Citation

  • Frank Strobel, 2011. "The dividend puzzle and tax: a note," Economics Bulletin, AccessEcon, vol. 31(3), pages 2736-2743.
    • Handle: RePEc:ebl:ecbull:eb-10-00484
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P246.pdf
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    References listed on IDEAS

    as
    1. B. Douglas Berhheim, 1991. "Tax Policy and the Dividend Puzzle," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 455-476, Winter.
    2. Stephen A. Ross, 1977. "The Determination of Financial Structure: The Incentive-Signalling Approach," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 23-40, Spring.
    3. Sudipto Bhattacharya, 1979. "Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 259-270, Spring.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    dividend puzzle; taxation; interfirm equity; tax clienteles;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance

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