TITLE

The Effect of the May 2003 Dividend Tax Cut on Corporate Dividend Policy: Empirical and Survey Evidence

AUTHOR(S)
Brav, Alon; Graham, John R.; Harvey, Campbell R.; Michaely, Roni
PUB. DATE
September 2008
SOURCE
National Tax Journal;Sep2008, Vol. 61 Issue 3, p381
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
We analyze the impact of the May 2003 dividend tax cut on corporate dividend policy. First, we find that while there was a temporary increase in dividend initiations, this increase was not long-lasting. While dividend payments were increased right after the tax change, there was a larger and more pronounced increase in repurchases during the same time period. Second, we survey 328 financial executives to determine the effects of the May 2003 dividend tax cut. We find that the tax cut led to initiations and dividend increases at some firms. However, executives say that among the factors that affect dividend policy, the tax rate reduction is less important than the stability of future cash flows, cash holdings, and the historic level of dividends. Tax effects have roughly the same importance as attracting institutional investors and the availability of profitable investments. We also find that press releases only occasionally mention the dividend tax cut as the reason for an initiation. Overall we conclude that the dividend tax reduction had only a second-order impact of payout policy.
ACCESSION #
34991370

Tags: TAXATION;  TAX cuts;  TAX rebates;  TAX accounting;  TAX returns;  FINANCIAL executives;  INCOME tax;  PUBLIC finance;  SURVEYS

 

Related Articles

  • Distributional Effects of the 2001 and 2003 Tax Cuts: How Do Financing and Behavioral Responses Matter? Elmendorf, Douglas W.; Furman, Jason; Gale, William G.; Harris, Benjamin H. // National Tax Journal;Sep2008, Vol. 61 Issue 3, p365 

    We reexamine the distributional effects of the 2001 and 2003 tax changes, incorporating two factors omitted in standard distributional estimates: the financing of the tax changes, and the implications of behavioral responses for both after-tax income and other aspects of well-being. Using the...

  • Ensuring fiscal sustainability in the face of imminent ageing.  // OECD Economic Surveys: Finland;May2006, Vol. 2006 Issue 5, p39 

    Past tax cuts, expenditure slippage and imminent fiscal pressures from ageing have exhausted the scope for further income tax cuts, even though the latter would help to improve labour market performance. The key to long-run fiscal sustainability and reducing future tax pressures is containment...

  • The High Cost of Tax Rebates. Waldock, Marlene J. // njbiz;7/21/2008, Vol. 21 Issue 30, p14 

    The article focuses on tax rebates and looks at the eligibility requirement for the said rebate. According to the 2007 Homestead Rebate application which was sent to all New Jersey taxpayers, one must own and occupy property as his or her primary residence on October 1, 2007 in order to quality....

  • Boost for lower earners. WALKLEY, PAM // Money (14446219);Aug2012, Issue 148, p12 

    The article reports on the increase in the budgets of low- to medium-income earners in Australia for the 2012 financial year. The boost entails that up to 1 million will no longer have to lodge a tax return. The tripling of the tax-free threshold to 18,200 Australian dollars on July 1, 2012 also...

  • State budget, with tax cuts, due for approval this week.  // Inside Tucson Business;6/18/2007, Vol. 17 Issue 1, p3 

    The article reports that state lawmakers in Tucson, Arizona are expected to ratify a compromise state budget that will include, tax cuts on June 18, 2007. It is stated that the compromise has been approved by the House and Senate leaders and Governor Janet Napolitano's office on June 13, 2007....

  • Observations of the Year. Kessler, Stuart // Accounting Technology;Aug2007 Supplement, Vol. 23, p6 

    The article discusses the issues surrounding the application of electronic filing system (e-filing) for tax returns in the U.S. The issues cited include the high number of non-conformity of e-filing rules, reluctance of some taxpayers to opt for e-filing, and the effect of the planning changes...

  • 'Agility' � The Future.  // Logistics & Transport Focus;Mar2000, Vol. 2 Issue 2, p6 

    A survey conducted among the largest banks of Great Britain for 2002, has found out that millions of people gathering details for their self-assessment forms face unnecessarily high bank charges and long waits for copies of lost account statements. Researchers, posing as potential customers,...

  • 7.3: Information Content of Estimated Taxable Income and Book--Tax Differences.  // Foundations & Trends in Finance;2012, Vol. 7 Issue 1/2, p86 

    The article examines whether the tax information in the financial statements is value-relevant with reference to several literature on the topic. Taxable income can be used the tax information in the financial statements. A few research papers sought to examine the association between...

  • Will we ever make sense of the system? Hatfield, David // Inside Tucson Business;4/23/2007, Vol. 16 Issue 46, p26 

    The author reflects on the process of filing income tax in the U.S. He emphasizes how strange the process is and points out that there is no direct communication within the procedure. He then highlights the Ready Return program piloted by California that easily fills out the forms of people who...

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sign out of this library

Other Topics