Working Paper: NBER ID: w13601
Authors: jennifer l blouin; jana smith raedy; douglas a shackelford
Abstract: This paper tests whether firms altered their dividend and share repurchase policies in response to the 2003 reductions in shareholder tax rates. We predict that firms substituted dividends for repurchases, because the reduction in dividend tax rates exceeded the reduction in the capital gains tax rates. As expected, we find substitution and find that it is increasing in the percentage of the company owned by individual investors, the only shareholders affected by the legislation. These findings are consistent with boards of directors considering the tax preferences of individual stockholders (particularly officers and managers) when setting dividend and share repurchase policies.
Keywords: No keywords provided
JEL Codes: g3; g35; h24; h25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| individual ownership (D14) | dividends as a percentage of payouts (G35) |
| 2003 act (G38) | dividends as a percentage of payouts (G35) |
| insider ownership (G34) | proportion of payouts that are dividends (G35) |
| non-individual investors (G23) | proportion of payouts that are dividends (G35) |
| 2003 act (G38) | substitution from repurchases to dividends (G35) |
| individual ownership (D14) | substitution from repurchases to dividends (G35) |