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Dividend Tax Gradation and Corporate Investment Efficiency: Evidence from China

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  • Xinyi Tong

Abstract

This paper exploits China’s Graduated Dividend Tax (GDT) policy as a quasi-natural experiment and applies a difference-in-differences approach to examine the effect of dividend tax adjustments on firms’ investment efficiency. The results show that the policy improves investment efficiency, mainly by curbing overinvestment. Mechanism analyses indicate that the GDT policy operates by increasing individual investors’ patience and improving corporate governance, including reducing information asymmetry. Heterogeneity analyses further show that the effects are more pronounced for highly leveraged firms with more frequent shareholder meetings. Overall, the results suggest that the GDT policy improves firms’ investment efficiency by strengthening corporate governance and curbing overinvestment. JEL classification numbers: G32, G34, D22.

Suggested Citation

  • Xinyi Tong, 2026. "Dividend Tax Gradation and Corporate Investment Efficiency: Evidence from China," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 16(2), pages 1-5.
    • Handle: RePEc:spt:apfiba:v:16:y:2026:i:2:f:16_2_5
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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