Taxation and Dividend Policy: The Muting Effect of Agency Issues and Shareholder Conflicts

Taxation and Dividend Policy: The Muting Effect of Agency Issues and Shareholder Conflicts

Using proprietary data on the entire spectrum of ownership structure and exact tax status of investors and firms, we examine how dividend taxation affects payout. Utilizing an exogenous shock to dividend taxation, we show that absent any frictions, dividend taxation has a large impact on payout. As...

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Veröffentlicht in:The Review of financial studies 2017-09, Vol.30 (9), p.3176-3222
Hauptverfasser: Jacob, Martin, Michaely, Roni
Format: Artikel
Sprache:eng
Schlagworte:
Conflict
Coordination
Dividend distributions
Dividend policy
Owners
Ownership
Stockholders
Taxation
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creator Jacob, Martin
Michaely, Roni
description Using proprietary data on the entire spectrum of ownership structure and exact tax status of investors and firms, we examine how dividend taxation affects payout. Utilizing an exogenous shock to dividend taxation, we show that absent any frictions, dividend taxation has a large impact on payout. As agency issues and shareholder conflicts increase, owners' tax preferences have significantly smaller impact on payout. Three mechanisms reduce the dividend-tax sensitivity: Coordination among owners, heterogeneity in tax preferences, and diverging objectives between managers and owners. Altogether, taxation has a first-order impact on payout, but agency issues and shareholder conflicts mute its impact substantially.
doi_str_mv 10.1093/rfs/hhx041
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source Business Source Complete; JSTOR Archive Collection A-Z Listing; Oxford University Press Journals All Titles (1996-Current)
subjects Conflict
Coordination
Dividend distributions
Dividend policy
Owners
Ownership
Stockholders
Taxation
title Taxation and Dividend Policy: The Muting Effect of Agency Issues and Shareholder Conflicts
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