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Taxation and the cash flow sensitivity of dividends

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Listed author(s):
  • Jacob, Marcus
  • Jacob, Martin
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    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.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165176512005265
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    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 118 (2013)
    Issue (Month): 1 ()
    Pages: 186-188

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    Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:186-188
    DOI: 10.1016/j.econlet.2012.09.019
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

    Keywords: Taxation; Dividends; Cash flow sensitivity;

    Find related papers by 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

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    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 Jr., 2010. "Measurement Errors in Investment Equations," NBER Working Papers 15951, National Bureau of Economic Research, Inc.
    3. Raj Chetty & Emmanuel Saez, 2005. "Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 791-833.
    4. Heitor Almeida & Murillo Campello & Michael S. Weisbach, 2004. "The Cash Flow Sensitivity of Cash," Journal of Finance, American Finance Association, vol. 59(4), pages 1777-1804, 08.
    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(03), 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. Heitor Almeida & Murillo Campello & Antonio F. Galvao, 2010. "Measurement Errors in Investment Equations," Review of Financial Studies, Society for Financial Studies, vol. 23(9), pages 3279-3328.
    9. Holger Spamann, 2010. "The "Antidirector Rights Index" Revisited," Review of Financial Studies, Society for Financial Studies, vol. 23(2), pages 467-486, February.
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    Cited by:

    1. Alstadsaeter, Annette & Jacob, Martin & Kopczuk, Wojciech & Telle, Kjetil, 2016. "Accounting for Business Income in Measuring Top Income Shares: Integrated Accrual Approach Using Individual and Firm Data from Norway," CEPR Discussion Papers 11671, C.E.P.R. Discussion Papers.
    2. repec:spr:rvmgts:v:11:y:2017:i:3:d:10.1007_s11846-016-0197-9 is not listed on IDEAS

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