Dividend Taxes, Firm Growth, and the Allocation of Capital / Adrien Matray.

Format:

Book

Author/Creator:

Matray, Adrien.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30099.

NBER working paper series no. w30099

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

This paper investigates the 2013 three-fold increase in the French dividend tax rate. Using administrative data covering the universe of firms from 2008- 2017 and a quasi-experimental setting, we find that firms swiftly cut dividend payments and used this tax-induced increase in liquidity to accumulate more capital and labor, resulting in higher revenues. Heterogeneity analyses show that firms with high demand and returns to capital responded most, while no group of treated firms reduced their capital. Our results reject models in which higher dividend taxes increase the cost of capital and show that the tax-induced increase in liquidity relaxes financial constraints, which can reduce capital misallocation.

Notes:

Print version record

June 2022.