Did Firms Substitute Dividends for Share Repurchases after the 2003 Reductions in Shareholder Tax Rates? / Jennifer L. Blouin, Jana Smith Raedy, Douglas A. Shackelford.

Format:

Book

Author/Creator:

Blouin, Jennifer L.

Contributor:

National Bureau of Economic Research.

Raedy, Jana Smith.

Shackelford, Douglas A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13601.

NBER working paper series no. w13601

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

This paper tests whether firms altered their dividend and share repurchase policies in response to the 2003 reductions in shareholder tax rates. We predict that firms substituted dividends for repurchases, because the reduction in dividend tax rates exceeded the reduction in the capital gains tax rates. As expected, we find substitution and find that it is increasing in the percentage of the company owned by individual investors, the only shareholders affected by the legislation. These findings are consistent with boards of directors considering the tax preferences of individual stockholders (particularly officers and managers) when setting dividend and share repurchase policies.

Notes:

Print version record

November 2007.