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The impact of the dividend tax cut and managerial stock holdings on corporate dividend policy

  • Nam, Jouahn

    (Pace University)

  • Wang, Jun

    (Baruch College)

  • Zhang, Ge

    (University of New Orleans)

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    We examine the impact of the May 2003 dividend tax cut and managerial stock holdings on corporate dividend initiation decision. We find that managers who hold sizable stakes in their companies are more likely to initiate dividends following this tax cut. This positive relation is stronger for firms with higher growth opportunities. These results are consistent with the hypothesis that managers initiate dividends to maximize their own wealth. Moreover, the market reacts negatively (most positively) to dividend initiation announcements by firms with higher (lower) growth opportunities and higher (lower) managerial share holdings.

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    Paper provided by University of New Orleans, Department of Economics and Finance in its series Working Papers with number 2004-09.

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    Length: 31 pages
    Date of creation: 2004
    Date of revision:
    Handle: RePEc:uno:wpaper:2004-09
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