IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Companies' Financial Decisions Under the Distributed Profit Taxation Regime of Estonia

Listed author(s):
  • Aaro Hazak

This paper empirically analyzes companies' capital structure and dividend decisions under distributed profit taxation (DPT), Estonia's corporate taxation regime since 2000. The sample covers 26,000 observations of Estonian companies from 1995 to 2004. The results show that the DPT system has led companies to pay less in dividends and retain more profits. Simultaneously, the importance of external financing in companies' total capital has decreased. The undistributed profits appear to be partially retained as surplus cash, instead of being reinvested into long-term productive assets. DPT seems to support companies' liquidity and sustainability; however, the allocation of funds is potentially inefficient.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=27051X8U54101843
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 45 (2009)
Issue (Month): 4 (July)
Pages: 4-12

as
in new window

Handle: RePEc:mes:emfitr:v:45:y:2009:i:4:p:4-12
Contact details of provider: Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Michael Funke, 2002. "Determining Taxation and Investment Impacts of Estonia's 2000 Income Tax Reform," Finnish Economic Papers, Finnish Economic Association, vol. 15(2), pages 102-109, Autumn.
  2. Michael Funke & Holger Strulik, 2006. "Taxation, Growth and Welfare: Dynamic Effects of Estonia's 2000 Income Tax Act," Finnish Economic Papers, Finnish Economic Association, vol. 19(1), pages 25-38, Spring.
  3. Lewellen, Wilbur G. & Mauer, David C., 1988. "Tax Options and Corporate Capital Structures," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(04), pages 387-400, December.
  4. Frankfurter, George M. & Wood, Bob Jr., 2002. "Dividend policy theories and their empirical tests," International Review of Financial Analysis, Elsevier, vol. 11(2), pages 111-138.
  5. Aaro Hazak, 2006. "Dividend Decision under Distributed Profit Taxation: Investorís Perspective," Working Papers 145, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
  6. Joan Farre-Mensa & Roni Michaely & Martin Schmalz, 2014. "Payout Policy," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 75-134, December.
    • Allen, Franklin & Michaely, Roni, 2003. "Payout policy," Handbook of the Economics of Finance,in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 7, pages 337-429 Elsevier.
  7. Michael Funke, 2002. "Determining the Taxation and Investment Impacts of Estonia´s 2000 Income Tax Reform," Quantitative Macroeconomics Working Papers 20204, Hamburg University, Department of Economics.
  8. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
  9. Sanjiva Prasad & Christopher J. Green & Victor Murinde, 2001. "Company Financing, Capital Structure, and Ownership: A Survey, and Implications for Developing Economies," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  10. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
  11. Ronald C. Lease, & Kose John, & Avner Kalay, & Uri Loewenstein, & Oded H. Sarig,, 1999. "Dividend Policy:: Its Impact on Firm Value," OUP Catalogue, Oxford University Press, number 9780875844978.
  12. Stewart C. Myers, 2001. "Capital Structure," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 81-102, Spring.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:45:y:2009:i:4:p:4-12. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Nguyen)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.