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Taxation, Dividends, and Share Repurchases: Taking Evidence Global

  • Jacob, Martin

    ()

    (Uppsala Center for Fiscal Studies)

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    We compile a comprehensive international dividend and capital gains tax data set to study tax explanations of corporate payouts for a panel of 5,767 firms from 25 countries for 1990-2008. We find robust evidence that the tax penalty on dividends versus capital gains is statistically significant and negatively related to firms’ propensity to pay dividends, initiate such payments, and the amount of dividends paid. Our analysis further reveals that an increase in the dividend tax penalty raises firms’ likelihood to repurchase shares, initiate such repurchases, and the amount of shares repurchased. This is strong confirming evidence that when listed industrial firms globally design their payout policies, they take into careful consideration the relative tax implications of their payout choices.

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    File URL: http://ucfs.nek.uu.se/digitalAssets/129/129576_wp201010.pdf
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    Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Fiscal Studies with number 2010:10.

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    Length: 38 pages
    Date of creation: 22 Sep 2010
    Date of revision:
    Handle: RePEc:hhs:uufswp:2010_010
    Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
    Phone: + 46 18 471 25 00
    Fax: + 46 18 471 14 78
    Web page: http://www.nek.uu.se/
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      • 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.
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