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Firm-Level Responses to a Canceled Dividend Tax Increase

Author

Listed:
  • Holmberg, Johan

    (Department of Economics, Umeå University)

  • Selin, Håkan

    (Institute for Evaluation of Labour Market and Education Policy (IFAU) and UCFS)

Abstract

Several papers examine how firms react to dividend tax reforms. But can tax reforms affect firm behavior without even occurring? An increase in the dividend tax on shares of Swedish closely-held corporations, scheduled for January 1, 2018, was canceled at short notice. In a difference-in-difference setting, we examine how firms reacted to the government’s announced reform plans. We find that dividend payments increased in the “pre-reform years” and declined sharply in 2018, especially for cash-rich firms. This led to a reduction in the cash holdings, with potential implications for firm activity.

Suggested Citation

  • Holmberg, Johan & Selin, Håkan, 2025. "Firm-Level Responses to a Canceled Dividend Tax Increase," Umeå Economic Studies 1040, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:1040
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    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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