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Income Taxation Regulation And Companies’ Behaviour: Is The Romanian Companies’ Dividend Policy Influenced By The Changes In Income Taxation?

Author Info

Listed author(s):
  • Dragota, Mihaela

    ()

    (Department of Finance, Academy of Economic Studies, Bucharest, Romania)

  • Dragota, Victor

    ()

    (Department of Finance, Academy of Economic Studies, Bucharest, Romania)

  • Tatu, Lucian

    ()

    (Department of Finance, Academy of Economic Studies, Bucharest)

  • Tatu, Delia

    ()

    (Department of Economics, Academy of Economic Studies, Bucharest)

Abstract

This paper analyzes the dividend payout by Romanian companies listed on the Bucharest Stock Exchange in connection with the changes in corporate taxes. If the tax burden on corporate gross incomes is increasing, the companies’ management can follow two reasons in deciding the dividend payout: to allocate more for investments, or to increase the dividend ratio. Each of these decisions can be argued based on Corporate Finance principles, depending on the management objectives. This paper found no significant correlation between the dividend policy and the corporate tax burden. However, the dividend payout reacted when the regulations related to the tax treatment of incomes were changed in 2005. Moreover, the dividend policy seems to be sensitive to the ownership structure, which can be explained by the impact of some agency problems.

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File URL: http://www.ipe.ro/rjef/rjef1_09/rjef1_09_6.pdf
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Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): 6 (2009)
Issue (Month): 1 (March)
Pages: 76-93

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Handle: RePEc:rjr:romjef:v:6:y:2009:i:1:p:76-93
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Keywords: dividend payout; taxation; agency problem; emergent markets;

Find related papers by JEL classification:

  • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
  • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
  • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

References listed on IDEAS
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  1. Geert Bekaert & Campbell R. Harvey, 2000. "Foreign Speculators and Emerging Equity Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 565-613, 04.
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  8. Jean Crockett & Irwin Friend, "undated". "Dividend Policy in Perspective: Can Theory Explain Behavior? (Revision of 30-86)," Rodney L. White Center for Financial Research Working Papers 04-88, Wharton School Rodney L. White Center for Financial Research.
  9. Peterson, Pamela P. & Peterson, David R. & Ang, James S., 1985. "Direct evidence on the marginal rate of taxation on dividend income," Journal of Financial Economics, Elsevier, vol. 14(2), pages 267-282, June.
  10. Jean Crockett & Irwin Friend, "undated". "Dividend Policy in Perspective: Can Theory Explain Behavior? (Revision of 30-86)," Rodney L. White Center for Financial Research Working Papers 4-88, Wharton School Rodney L. White Center for Financial Research.
  11. Pettit, R. Richardson, 1977. "Taxes, transactions costs and the clientele effect of dividends," Journal of Financial Economics, Elsevier, vol. 5(3), pages 419-436, December.
  12. Pattenden, Kerry & Twite, Garry, 2008. "Taxes and dividend policy under alternative tax regimes," Journal of Corporate Finance, Elsevier, vol. 14(1), pages 1-16, February.
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  14. Easterbrook, Frank H, 1984. "Two Agency-Cost Explanations of Dividends," American Economic Review, American Economic Association, vol. 74(4), pages 650-659, September.
  15. Mihaela Dragota & Andreea Semenescu, 2008. "A Dynamic Analysis of Capital Structure Determinants. Empirical Results for Romanian Capital Market," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 4(4(521)), pages 65-80, April.
  16. Victor Dragota & Anamaria Ciobanu & Delia Catarama & Andreea Semenescu & Carmen Maria Lacatus, 2009. "Minority Shareholders’ Protection: the Romanian Experience," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 2(02(531)), pages 35-48, February.
  17. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
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