What Do Firms Do When Dividend Tax Rates Change? An Examination of Alternative Payout Responses
By Michelle Hanlon, Jeffrey L. Hoopes. 2014
177 citations recorded by the source corpus.
This paper investigates whether investor-level taxes affect corporate payout policy decisions. We predict and find a surge of special dividends in the final months of 2010 and 2012, immediately before individual-level dividend tax rates were expected to increase. We also find evidence that immediately before the expected tax increases, firms altered the timing of their regular dividend payments by shifting what would normally be January regular dividend payments into the preceding December. To our knowledge this is the first evidence in the literature about changes in the timing of regular dividend payments in response to tax law changes. For both actions (specials and shifting), we find that it was more likely for a firm to respond to individual-level tax rates if insiders owned a relatively large amount of the firm. Overall, our paper provides evidence that managers consider individual-level taxes in making corporate payout decisions.
Subfields: Accounting, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/450d4bfdd67171954b8a72df3b9dafc6663907e9
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Citations in the corpus
- Payout Policy Through the Financial Crisis: The Growth of Repurchases and the Resilience of Dividends (2015, unknown): “Consistent with Edgerton (2013), our evidence suggests that taxes are not the main driver of changes in payout policy over the past decade, although taxes are likely important at the margin (Hanlon and Hoopes, 2014).”
- Does PCAOB Inspection Access Improve Audit Quality? An Examination of Foreign Firms Listed in the United States (2016, result): “However, consistent with recent research (e.g., Cornelli et al., 2013; Hanlon and Hoopes, 2014), I use a linear model to facilitate easier interpretation of coefficients and interaction terms and for including fixed effects in Equations 1 and 2.”