Dividend Policy : New Empirical Evidence (original) (raw)
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Taxation & dividend policy: new empirical evidence
Corporate Ownership and Control, 2008
The present paper takes advantage of two important changes in the Canadian taxation of capital gains in Canada to examine the interaction between taxation and corporate dividend policy. Our empirical results suggest that Canadian firms did not increase their dividend payout after the reduction of capital gains exemption in 1987; however, they did so when the remaining $100,000 capital gains exemption in 1994 was eliminated. Moreover, we find that firms with high level of control concentration tend to pay fewer dividends. Our finding suggests taxation does influence corporate dividend policy.
Dividend Taxation and Equity Value: The Canadian Tax Changes of 1986
The Canadian Journal of Economics, 1995
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3 1 Ownership Structure , Corporate Control and Dividend Payout in Canada
2016
This paper examines the relationship between the structure of the ownership of equity in a company and the company’s dividend policy. For this purpose, a company’s dividend policy is characterised by the level and frequency of changes with regular dividend payments. A survey of the literature reveals that several hypotheses have been put forward regarding changes in dividend policy.Dividend policy is used to signal important information to potential investors, dividend policy can be used to increase or decrease the need for a company to resort to external capital markets, or dividend policy can serve the interests of major shareholders. The implications of these hypotheses are developed, and then compared to the actual behaviour of a sample of 600 Canadians in listed firms in order to examine which hypotheses are most useful in accounting for their behaviour. In using ordinary and logit regressions and conditional probability models to test the hypotheses, the results indicate that:...
Corporate Control, Family Firms and Dividend Decisions in Canada
Corporate Ownership and Control, 2007
The purpose of this paper is to examine the relationship between dividend payments, firms’ decisions control and the nature of family firms, in order to assess whether large shareholders expropriate wealth from minority shareholders in Canada. Using data collected from various sources, we formulated and tested three hypotheses related to this issue using OLS and logit regression models. Our results indicate that in Canadian firms, dividends are used as a protective mechanism for minority shareholders against the possibility of expropriation by large shareholders. The protective power of dividend, however, seems less effective in Canadian family firms. The hidden reason is the control that families exert on the dividend payout policy. Overall, our results show no clear evidence of expropriation of wealth inflicted on small shareholders by large shareholders. This research has shown that the financial policies of Canadian firms in which a family represents the majority of the sharehol...
We consider how fund managers respond to the conflicting preferences of their investors. We focus on the conflict between the taxable and retirement accounts of international funds, which face different tradeoffs between dividends and capital gains. In principle, managers could resolve this conflict through dividend arbitrage, but a proprietary database of dividend-arbitrage transactions shows that in practice they cannot. Thus, managers must resolve it through their investment policies. We find robust evidence that managers with more ARTICLE IN PRESS www.elsevier.com/locate/jfec 0304-405X/$-see front matter r
Impact of taxation on dividend policy: Evidence from Pakistan
A B S T R A C T This paper analyses the impact of capital gains taxation (CGT) on dividend policy among firms that are listed at the Karachi Stock Exchange (now, Pakistan Stock Exchange or PSX). The reason for choosing the Pakistani market is the country's idiosyncratic taxation system regarding dividend and capital gains. In Pakistan, capital gains were tax-free and taxation of capital gains was levied for the first time beginning July 2010. This motivates us to study the special case of Pakistani market regarding the relationship between the imposition of capital gains taxation and the pattern of dividend payouts. For this purpose, we use both the static and dynamic panel data models (generalized methods of moments) to analyze dividend payment behavior for a sample of 284 non-financial firms listed at the PSX from the years 2006–2014. We use the dividends to total assets ratio as a dependent variable and a taxation dummy along with other control variables such as liquidity, leverage, profitability, last year's dividend and firm size, as explanatory variables. Results of the regressions show that capital gains tax has no impact on dividend payments, while profitability, leverage, and last year's dividend are the most significant determinants of dividend payments in the Pakistani market.
Taxation and Dividend Policy: The Muting Effect of Diverse Ownership Structure
Social Science Research Network, 2014
Policymakers frequently try to use dividend tax changes to affect payout policy. However, empirical evidence finds the effect to be much smaller than theory implies. Using identification strategy that exploits a large exogenous shock to dividend taxation and comprehensive proprietary data on ownership structure and owners' tax preference, we show that absent of conflicting objectives between managers and owners, dividend taxation has a large effect on payouts. The impact becomes insignificant as the number of owners increases. Differential tax preferences across owners is one factor. However, even when owners have the same tax preferences, disperse ownership significantly reduces the impact of dividend taxation; plausibly due to coordination problems across owners and conflicting objectives of owners and managers. Our results explain why previous evidence on the impact of dividend taxation has been so elusive. Taxation has a first order impact on payout policy, but disperse ownership mutes its impact substantially.