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Direct Evidence of Dividend Tax Clienteles

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Abstract

We study a large data set of stock portfolios held by individuals and organizations in the Swedish stock market. The dividend yields on these port-folios are systematically related to investors' relative tax preferences for dividends versus capital gains. Tax-neutral investors earn 40 basis points higher dividend yield on their portfolios than investors which face higher effective taxation of dividends than capital gains. We conclude that there are dividend tax clienteles in the market. We also argue that the abundant portfolio holdings by private corporations, despite triple taxation at a combined marginal tax rate as high as 77.5%, is a consequence of taxation.

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  • Dahlquist, Magnus & Robertsson, Göran & Rydqvist, Kristian, 2007. "Direct Evidence of Dividend Tax Clienteles," SIFR Research Report Series 51, Institute for Financial Research.
  • Handle: RePEc:hhs:sifrwp:0051
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    Cited by:

    1. Clemens Sialm, 2009. "Tax Changes and Asset Pricing," American Economic Review, American Economic Association, vol. 99(4), pages 1356-1383, September.

    More about this item

    Keywords

    Tax incidence; dividend tax clienteles; capital gains tax; stock ownership;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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