IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v118y2013i1p186-188.html
   My bibliography  Save this article

Taxation and the cash flow sensitivity of dividends

Author

Listed:
  • Jacob, Marcus
  • Jacob, Martin

Abstract

This paper investigates tax reasons for cross-sectional deviations from the general consensus in literature that a firm’s cash flow has a positive effect on dividend payout. We use a large multinational panel data set to show that the positive cash flow sensitivity of dividends is decreasing in dividend taxes.

Suggested Citation

  • Jacob, Marcus & Jacob, Martin, 2013. "Taxation and the cash flow sensitivity of dividends," Economics Letters, Elsevier, vol. 118(1), pages 186-188.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:186-188
    DOI: 10.1016/j.econlet.2012.09.019
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176512005265
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2012.09.019?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Denis, David J. & Osobov, Igor, 2008. "Why do firms pay dividends? International evidence on the determinants of dividend policy," Journal of Financial Economics, Elsevier, vol. 89(1), pages 62-82, July.
    2. Heitor Almeida & Murillo Campello & Antonio F. Galvao, 2010. "Measurement Errors in Investment Equations," The Review of Financial Studies, Society for Financial Studies, vol. 23(9), pages 3279-3328.
    3. Raj Chetty & Emmanuel Saez, 2005. "Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 791-833.
    4. repec:bla:jfinan:v:59:y:2004:i:4:p:1777-1804 is not listed on IDEAS
    5. Erickson, Timothy & Whited, Toni M., 2002. "Two-Step Gmm Estimation Of The Errors-In-Variables Model Using High-Order Moments," Econometric Theory, Cambridge University Press, vol. 18(3), pages 776-799, June.
    6. Brav, Alon & Graham, John R. & Harvey, Campbell R. & Michaely, Roni, 2005. "Payout policy in the 21st century," Journal of Financial Economics, Elsevier, vol. 77(3), pages 483-527, September.
    7. Korinek, Anton & Stiglitz, Joseph E., 2009. "Dividend taxation and intertemporal tax arbitrage," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 142-159, February.
    8. Holger Spamann, 2010. "The "Antidirector Rights Index" Revisited," The Review of Financial Studies, Society for Financial Studies, vol. 23(2), pages 467-486, February.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Kopczuk, Wojciech & Alstadsæter, Annette & Jacob, Martin & Telle, Kjetil, 2016. "Accounting for Business Income in Measuring Top Income Shares: Integrated Accrual Approach Using Individual and Firm Data from," CEPR Discussion Papers 11671, C.E.P.R. Discussion Papers.
    2. Annette Alstadsæter & Martin Jacob & Wojciech Kopczuk & Kjetil Telle, 2016. "Accounting for Business Income in Measuring Top Income Shares: Integrated Accrual Approach Using Individual and Firm Data from Norway," NBER Working Papers 22888, National Bureau of Economic Research, Inc.
    3. Annika Hegemann & Angela Kunoth & Kristina Rupp & Caren Sureth-Sloane, 2017. "Hold or sell? How capital gains taxation affects holding decisions," Review of Managerial Science, Springer, vol. 11(3), pages 571-603, July.
    4. Chi, Yung-Ling, 2022. "Owners’ portfolio diversification and internal capital allocation," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).
    5. Hegemann, Annika & Kunoth, Angela & Rupp, Kristina & Sureth, Caren, 2015. "Impact of capital gains taxation on the holding period of investments under different tax systems," arqus Discussion Papers in Quantitative Tax Research 183, arqus - Arbeitskreis Quantitative Steuerlehre.
    6. Ed-Dafali, Slimane & Patel, Ritesh & Iqbal, Najaf, 2023. "A bibliometric review of dividend policy literature," Research in International Business and Finance, Elsevier, vol. 65(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jacob, Martin & Alstadsæter, Annette, 2013. "Payout policies of privately held firms: Flexibility and the role of income taxes," arqus Discussion Papers in Quantitative Tax Research 152, arqus - Arbeitskreis Quantitative Steuerlehre.
    2. Alzahrani, Mohammed & Lasfer, Meziane, 2012. "Investor protection, taxation, and dividends," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 745-762.
    3. Annette Alstadsæter & Erik Fjærli, 2009. "Neutral taxation of shareholder income? Corporate responses to an announced dividend tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(4), pages 571-604, August.
    4. Becker, Bo & Jacob, Marcus & Jacob, Martin, 2013. "Payout taxes and the allocation of investment," Journal of Financial Economics, Elsevier, vol. 107(1), pages 1-24.
    5. Zhe An & Wenlian Gao & Donghui Li & Dezhu Ye, 2022. "Dividend payouts, cash‐flow uncertainty and the role of institutions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(7-8), pages 1356-1390, July.
    6. Atsushi Chino & Joon Ho Kim, 2022. "Does dividend policy affect sales growth in product markets? Evidence from the 2003 dividend tax cut," Financial Management, Financial Management Association International, vol. 51(2), pages 539-571, June.
    7. Laura Kawano, 2014. "The Dividend Clientele Hypothesis: Evidence from the 2003 Tax Act," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 114-136, February.
    8. Balachandran, Balasingham & Khan, Arifur & Mather, Paul & Theobald, Michael, 2019. "Insider ownership and dividend policy in an imputation tax environment," Journal of Corporate Finance, Elsevier, vol. 54(C), pages 153-167.
    9. Booth, Laurence & Zhou, Jun, 2017. "Dividend policy: A selective review of results from around the world," Global Finance Journal, Elsevier, vol. 34(C), pages 1-15.
    10. Jesse Edgerton, 2010. "Effects of the 2003 dividend tax cut: evidence from real estate investment trusts," Finance and Economics Discussion Series 2010-34, Board of Governors of the Federal Reserve System (U.S.).
    11. Herron, Richard & Platt, Katarzyna, 2021. "World dividends and tax shocks," Global Finance Journal, Elsevier, vol. 47(C).
    12. Ye, Dezhu & Deng, Jie & Liu, Yi & Szewczyk, Samuel H. & Chen, Xiao, 2019. "Does board gender diversity increase dividend payouts? Analysis of global evidence," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 1-26.
    13. Fayez A. Elayan & Jingyu Li & Maureen E. Donnelly & Allister W. Young, 2009. "Changes to Income Trust Taxation in Canada: Investor Reaction and Dividend Clientele Theory," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(5-6), pages 725-753.
    14. Fayez A. Elayan & Jingyu Li & Maureen E. Donnelly & Allister W. Young, 2009. "Changes to Income Trust Taxation in Canada: Investor Reaction and Dividend Clientele Theory," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(5‐6), pages 725-753, June.
    15. Chris Mitchell, 2019. "The Lock-In Effect and the Corporate Payout Puzzle," ISER Discussion Paper 1070, Institute of Social and Economic Research, The University of Osaka.
    16. Jacob, Martin, 2010. "Taxation, Dividends, and Share Repurchases: Taking Evidence Global," Working Paper Series, Center for Fiscal Studies 2010:10, Uppsala University, Department of Economics.
    17. Korkeamaki, Timo & Liljeblom, Eva & Pasternack, Daniel, 2010. "Tax reform and payout policy: Do shareholder clienteles or payout policy adjust?," Journal of Corporate Finance, Elsevier, vol. 16(4), pages 572-587, September.
    18. Nguyen, Truong-Giang, 2020. "Stock liquidity and dividend policy: Evidence from an imputation tax environment," International Review of Financial Analysis, Elsevier, vol. 72(C).
    19. Fidrmuc, Jana P. & Jacob, Marcus, 2010. "Culture, agency costs, and dividends," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 321-339, September.
    20. Ayyagari, Meghana & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2014. "Does local financial development matter for firm lifecycle in India ?," Policy Research Working Paper Series 7008, The World Bank.

    More about this item

    Keywords

    Taxation; Dividends; Cash flow sensitivity;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H - Public Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:186-188. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.