Dividends and Taxes / Roger Gordon, Martin Dietz.

Format:

Book

Author/Creator:

Gordon, Roger.

Contributor:

National Bureau of Economic Research.

Dietz, Martin.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12292.

NBER working paper series no. w12292

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

How do dividend taxes affect firm behavior and what are their distributional and efficiency effects? To answer these questions, the first problem is coming up with an explanation for why firms pay dividends, in spite of their tax penalty.

This paper surveys three different models for why firms pay dividends, and then uses each model to examine the behavioral and efficiency effects of dividend taxes. The three models examined are: the "new view," an agency cost explanation, and a signaling model.

While all three models forecast dividends, their forecasts regarding other firm behavior, and their forecasts for the efficiency and distributional effects of a dividend tax, often differ. Given the evidence to date, we find the agency model is the one most consistent with the data.

Notes:

Print version record

June 2006.