Dividends, Capital Gains, and the Corporate Veil: Evidence from Britain, Canada, and the United States
This paper investigates the effects of increased cash dividend payout, and of "forced realizations~ of capital gains in corporate control transactions, on the level of aggregate consumption. The results support the proposition that investors respond differently to cash receipts from firms and to accruing capital gains. Consistent but weak evidence for the United States, Great Britain, and Canada suggests that higher dividend tax rates lower consumption. This is consistent with such tax rates increasing corporate saving, while households fail to completely pierce the corporate veil and therefore reduce their consumption. Time series evidence from the U.S. and the U.K. also suggests that "forced realizations" of capital gains in takeovers may spur consumption, indicating a relatively unexplored link between corporate financial decisions and aggregate consumption.
|Date of creation:||May 1989|
|Date of revision:|
|Publication status:||published as Bernheim, B. Douglas and John B. Shoven (eds.) National Saving and Economic Performance. Chicago: The University of Chicago Press, 1991.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Campbell, John & Deaton, Angus, 1989.
"Why Is Consumption So Smooth?,"
3221494, Harvard University Department of Economics.
- Whitney K. Newey & Kenneth D. West, 1986.
"A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix,"
NBER Technical Working Papers
0055, National Bureau of Economic Research, Inc.
- Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
- Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
- Bhatia, Kul B., 1979. "Corporate taxation, retained earnings, and capital formation," Journal of Public Economics, Elsevier, vol. 11(1), pages 123-134, February.
- Campbell, John Y. & Mankiw, N. Gregory, 1990.
"Permanent Income, Current Income, and Consumption,"
3353762, Harvard University Department of Economics.
- Feldstein, Martin S & Fane, George, 1973. "Taxes, Corporate Dividend Policy and Personal Savings: The British Postwar Experience," The Review of Economics and Statistics, MIT Press, vol. 55(4), pages 399-411, November.
- Malinvaud, Edmond, 1986. " Pure Profits as Forced Saving," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(1), pages 109-30.
- M. S. Feldstein, 1970. "Corporate Taxation and Dividend Behaviour," Review of Economic Studies, Oxford University Press, vol. 37(1), pages 57-72.
- E. Philip Howrey & Saul H. Hymans, 1978. "The Measurement and Determination of Loanable-Funds Saving," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 9(3), pages 655-685.
- Feldstein, Martin S., 1973. "Tax incentives, corporate saving, and capital accumulation in the United States," Journal of Public Economics, Elsevier, vol. 2(2), pages 159-171, April.
- Shefrin, Hersh M. & Statman, Meir, 1984. "Explaining investor preference for cash dividends," Journal of Financial Economics, Elsevier, vol. 13(2), pages 253-282, June.
- Alan J. Auerbach & Kevin Hassett, 1991.
"Corporate Savings and Shareholder Consumption,"
in: National Saving and Economic Performance, pages 75-102
National Bureau of Economic Research, Inc.
- Bagwell, Laurie Simon & Shoven, John B, 1989. "Cash Distributions to Shareholders," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 129-40, Summer.
- Robert B. Avery & Gregory E. Elliehausen, 1986. "Financial characteristics of high-income families," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Mar, pages 163-177.
- Hall, Robert E, 1988.
"Intertemporal Substitution in Consumption,"
Journal of Political Economy,
University of Chicago Press, vol. 96(2), pages 339-57, April.
- Julian R. Franks & Robert S. Harris & Cohn Mayer, 1988. "Means of Payment in Takeovers: Results for the United Kingdom and the United States," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 221-264 National Bureau of Economic Research, Inc.
- David, Paul A & Scadding, John L, 1974. "Private Savings: Ultrarationality, Aggregation, and "Denison's Law."," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 225-49, Part I, M.
- Hayashi, Fumio, 1982. "The Permanent Income Hypothesis: Estimation and Testing by Instrumental Variables," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 895-916, October.
- Hendershott, Patric H & Peek, Joe, 1989. "Household Saving in the United States: Measurement and Behavior," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(1), pages 11-19, January.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2975. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.