Dividend Tax Capitalization: Further Thoughts, Comments, and Response to Michelle Hanlon, James Myers, and Terry Shevlin
Recent studies by Hanlon, Myers, and Shevlin (2001) and Dhaliwal et al. (2001) have stirred considerable interest in the topic of dividend tax capitalization. In these papers HMS and DEMB take a critical look at the theory and findings in Harris and Kemsley (1999). In a prior paper I provide preliminary thoughts and responses to the concerns they raise. Since that time I have received many follow-up queries, especially in regard to issues raised by Hanlon, Myers, and Shevlin (2001). In this paper I provide answers to the recent queries. I also express my latest thoughts and comments regarding the tax capitalization debate, and I argue the evidence in all eight HMS tables is consistent with predictions from the model in Harris and Kemsley (1999).
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