Download or read book Dividend Taxes and Share Prices written by William M. Gentry and published by . This book was released on 2001 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial economists have debated the impact of dividend taxes on firm valuation for decades, but existing empirical evidence is mixed. In this study, we avoid certain complications inherent in previous empirical work by exploiting institutional characteristics of Real Estate Investment Trusts (REITs). For REITs, dividend policy is largely non-discretionary, share repurchases are not tax advantaged relative to dividends, and the market value of a firm's assets is relatively transparent to investors. In addition, REITs are exempt from corporate taxes, so their tax deductions flow directly to shareholders as reductions in dividend taxes. Within this environment, we regress the market value of a REIT's equity on the market value of its assets and its tax basis in assets, which creates tax deductions that lower future dividend taxes. We find that tax basis has a positive effect on firm value, which suggests that investors capitalize future dividend taxes into share prices

Download or read book Dividend Taxes and Share Prices written by William M. Gentry and published by . This book was released on 2011 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dividend taxes have stimulated decades of debate regarding firm valuation and the cost of equity capital. However, existing evidence is mixed. In this study, we take a new approach to examine the share price effects of dividend taxes that exploits institutional characteristics of Real Estate Investment Trusts (REITs), avoiding some of the complications inherent in previous empirical work. For REITs, dividend policy is largely non-discretionary, share repurchases do not offer tax advantages relative to dividends, and the market value of a firm's assets is relatively transparent to investors. In addition, REITs are exempt from corporate taxes, so their tax deductions flow directly to shareholders as reductions in dividend taxes. Within this environment, we regress the market value of a REIT's equity on the market value of its assets and its tax basis in assets, which creates tax deductions that lower future dividend taxes. We find that tax basis has a positive effect on firm value, which suggests that investors capitalize future dividend taxes into share prices.

Download or read book The Effects of Dividend Taxes on Equity Prices written by Stephen Bond and published by International Monetary Fund. This book was released on 2007-08-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We re-examine the extent to which personal taxes on dividends are capitalized into the equity prices of domestic firms, using data from around the time of the 1997 U.K. dividend tax reform, which removed a significant tax credit for an important group of investors: U.K. pension funds. The tax-adjusted CAPM suggests that the impact should depend on an average of dividend tax rates across all investors, and that U.K. pension funds should reduce their holdings of the previously tax-favored asset: U.K. equities. Given that U.K. pension funds are small relative to the total size of the world capital market, a small open economy-type argument implies that the main effect of the reform would be to reduce U.K. pension funds' ownership of U.K. equities, with little impact on their price. We present evidence which is consistent with these hypotheses. We discuss why previous research (Bell and Jenkinson, 2002) reached a different conclusion.

Download or read book The Share Price Effects of Dividend Taxes and Tax Imputation Credits written by Trevor S. Harris and published by . This book was released on 1999 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the hypothesis that dividend taxes are capitalized into share prices by focusing on investors' implicit valuations of retained earnings versus paid-in equity. Retained earnings are distributable as taxable dividends, whereas paid-in equity is distributable as a tax-free return of capital. Consistent with dividend tax capitalization, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. In addition, differences in dividend tax rates across U.S. tax regimes are associated with predictable differences in the magnitude of the implied tax discount for retained earnings, as are differences in dividend tax rates across Australia, Japan, France, Germany, and the United Kingdom

Download or read book The Economic Effects of Dividend Taxation written by Kenneth James McKenzie and published by . This book was released on 1996 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dividend Taxes and Stock Volatility written by Board of Governors of the Federal Reserv and published by Createspace Independent Publishing Platform. This book was released on 2016-01-16 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Often when we discuss the effects of taxes, we focus on the effects on the mean of firm value and de-emphasize the effects on the variance of the distribution. The existing literature on dividend taxation has analyzed the effect on firm stock price (Auerbach and Hassett (2005) and Amromin, Harrison and Sharpe (2008)). However, there are two important moments for the stock: the level of the stock price and the volatility of the stock. In a world where executives are more risk averse than most shareholders (since they are unable to diversify away firm-speciffc risk), we want to focus on both the mean and the variance effects due to agency costs. If a dividend tax change suffciently increases volatility, the executive may take actions to decrease the volatility of the stock at the expense of the share price. Therefore, the stock price might not increase as much as it would have in a world with risk-neutral executives (or equally risk averse executives and shareholders). It is therefore important to consider the effects on the volatility of the stock.

Download or read book The Share Price Effects of Dividend Taxes and Tax Imputation Credits written by Trevor S. Harris and published by . This book was released on 2011 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: The relation between shareholder-level taxes and firm value has fundamental implications for understanding why firms pay dividends and how taxes influence capital structure choices. Despite its importance, however, several underlying problems have hampered existing research on the specific question of dividend tax capitalization. We take a new approach, directly testing the relationship between dividend taxes and the valuation of common equity and earnings. Retained earnings are subject to dividend taxes upon distribution, but paid-in equity can be returned to shareholders as a tax-free return of capital. Therefore we test the prediction that dividend taxes result in a lower value for retained earnings than for paid-in equity, after controlling for the predictable influence of dividend taxes on the valuation of earnings. We strengthen this research design by repeating the basic test in several different tax regimes. In the United States, we perform tests for five tax regimes in the 1975-1994 period corresponding to five different levels of dividend taxation. We also conduct tests for the 1984 1994 period for Australia, France, Germany, Japan, and the United Kingdom. The non-U.S. settings allow for comparisons of empirical results across different levels of dividend tax relief provided by tax imputation credits.Our investigation results in three principal findings. First, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. This finding is consistent with the capitalization of future dividend taxes in retained earnings, and it is robust to inclusion of a variety of control variables and tests for possible alternative explanations. Second, we find that differences in dividend tax rates across U.S. tax regimes are associated with predictable differences in the implied tax discount for retained earnings. Third, cross-country variation in dividend tax rates is associated with predictable variation in the implied tax discount. Furthermore, the difference in dividend tax rates across two different tax regimes in the United Kingdom is associated with predictable differences in the value discount.

Download or read book Dividend Taxes Corporate Investment and Q written by James M. Poterba and published by . This book was released on 1981 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: Taxes on corporate distributions have traditionally been regarded as a "double tax" on corporate income. This view implies that while the total effective tax rate on corporate source income affects real economic decisions, the distribution of this tax burden between the shareholders and the corporation is irrelevant. Recent research has suggested an alter- native to this traditional view. One explanation of why firms in the U.S. pay dividends in spite of the heavy tax liabilities associated with this form of distribution is that the stock market capitalizes the tax payments associated with corporate distributions. This capitalization leaves investors indifferent at the margin between corporations paying our dividends and retaining earnings. This alternative view holds that while changes in the dividend tax rate will affect shareholder wealth, they will have no impact on corporate investment decisions. This paper develops econometric tests which distinguish between these two views of dividend taxation. By extending Tobin's "q" theory of investment to incorporate taxes at both the corporate and personal levels, the implications of each view for corporate investment decisions can be derived. The competing views may be tested by comparing the performance of investment equations estimates under each theory's predict ions. British time series data are particularly appropriate for testing hypotheses about dividend taxes because of the substantial postwar variation in effective tax rates on corporate distributions. The econometric results suggest that dividend taxes have important effects on investment decisions

Download or read book The Influence of Dividend Taxes on the Price of Public Utility Stock written by Laurence Earl Blose and published by . This book was released on 1987 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Share Price Effects of Dividend Taxes and Tax written by Trevor S. Harris and published by . This book was released on 1999 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Are Shareholder Dividend Taxes on Corporate Retained Earnings Impounded in Equity Prices written by Dan S. Dhaliwal and published by . This book was released on 2001 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recently, several studies have concluded that individual investor level dividend taxes on corporate retained earnings are impounded in common stock prices, independent of the timing of dividend payments. We show that the model underlying these studies is internally inconsistent. We also discuss why the model of dividend tax capitalization described in these recent studies is not likely to be descriptive of the taxation of corporate distributions, and we present several reasons, with corroborating data, to believe that common stock prices are not affected by dividend taxes in the manner articulated in these studies. Our empirical results can be summarized as follows. We replicate some of the basic results of prior dividend capitalization studies. We test for evidence of dividend tax capitalization around tax rate changes resulting from the ERTA81, the TRA86 and the OBRA93. Using the same methodology employed in recent research, the evidence does not support dividend tax capitalization across the three tax regimes. We also perform numerous additional data analyses that in general produce results that do not support the conclusions of recent dividend tax capitalization studies. Finally, we find that after controlling for market to book ratios, the main results in prior studies vanish. Overall, the analyses and evidence in this study indicate that shareholder dividend taxes on corporate retained earnings are not impounded in stock prices.

Download or read book Dividend Taxes and Shared Prices written by William M. Gentry and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Effect of Shareholder Level Dividend Taxes on Stock Prices written by Benjamin C. Ayers and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the effect of an increase in the individual (shareholder-level) income tax rate on share values. We regress cumulative daily abnormal stock returns surrounding the passage of the Revenue Reconciliation Act of 1993 on firm dividend yield, tax status of the investor as represented by level of institutional ownership, the interaction of these two variables, and control variables. Consistent with our expectations, we find (1) that the higher the firm's dividend yield, the more negative the firm's stock price reaction to the increase in the individual income tax rate (i.e., the dividend tax rate) enacted in the Revenue Reconciliation Act of 1993, and (2) institutional holdings mitigate this negative reaction. Our results suggest that both the dividend policy of the firm and the tax status of the marginal investor influence the extent to which dividend taxes are reflected in share values. Our evidence is consistent with the traditional view that firm dividend policy influences the extent to which tax rate changes affect share values.

Download or read book Promoting Corporate Responsibility Through the Reduction of Dividend Taxes written by United States. Congress. Senate. Committee on Commerce, Science, and Transportation. Subcommittee on Consumer Affairs and Product Safety and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The dividend puzzle written by Reinhard Windisch and published by GRIN Verlag. This book was released on 2008-03-20 with total page 9 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essay from the year 2005 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 2,0, University of Graz, language: English, abstract: For many years economists and financial experts have argued about the „dividend puzzle“, i.e. about the impact of dividends on stock prices. Describe this puzzle, explain why it appears so intractable, and state what might be done to bring us all closer to an acceptable solution.

Download or read book Real Estate Finance and Investments written by William B. Brueggeman and published by Irwin Professional Pub. This book was released on 2005 with total page 640 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real Estate Finance & Investments is today's most indispensable, hands-on look at the increasingly vital arena of real estate partnerships, secondary mortgage markets, and fixed- and adjustable- rate mortgages. Updates to this edition include completely revised coverage of REITs, expanded coverage of CMBS, more detail on how underlying economic factors affect property value, and short readings based on current events.

Download or read book Interpreting Ex dividend Evidence written by James M. Poterba and published by . This book was released on 1983 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: