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The Effect Of The Relative Tax Treatment Of Dividends And Capital Gains On Corporate Valuation And Behavior
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Book Synopsis The Effect of the Relative Tax Treatment of Dividends and Capital Gains on Corporate Valuation and Behavior by : John Karl Scholz
Download or read book The Effect of the Relative Tax Treatment of Dividends and Capital Gains on Corporate Valuation and Behavior written by John Karl Scholz and published by . This book was released on 1988 with total page 276 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Relative Valuation of Dividends and Capital Gains in Finland by : Pasi Sorjonen
Download or read book The Relative Valuation of Dividends and Capital Gains in Finland written by Pasi Sorjonen and published by . This book was released on 1987 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Taxation and the Stock Market Valuation of Capital Gains and Dividends by : Roger Hall Gordon
Download or read book Taxation and the Stock Market Valuation of Capital Gains and Dividends written by Roger Hall Gordon and published by . This book was released on 1979 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dividends seem to be more heavily taxed than capital gains. Why then do corporations pay dividends rather than repurchasing shares or retaining earnings? Either corporations are not acting in the interests of shareholders, or else shareholders desire dividends sufficiently for nontax reasons to offset the tax effect. In this paper, we measure the relative valuation of dividends and capital gains in the stock market, using a variant of the capital asset pricing model. We find that dividends are not valued differently systematically from capital gains. This finding is consistent with share price maximization by firms but inconsistent with the fact that most shareholders pay a heavier tax on dividends. We also show that the relative value of dividends provides an indirect measure of a marginal Tobin's q. The measured value of dividends relative to capital gains tends to be higher during prosperous periods, as is consistent with this interpretation. We hope that this time series on a marginal Tobin's q will prove to be useful in forecasting the rate of investment
Book Synopsis Taxation and the Stock Market Valuation of Capital Gains and Dividends by : Roger Hall Gordon
Download or read book Taxation and the Stock Market Valuation of Capital Gains and Dividends written by Roger Hall Gordon and published by . This book was released on 1979 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dividends seem to be more heavily taxed than capital gains. Why then do corporations pay dividends rather than repurchasing shares or retaining earnings? Either corporations are not acting in the interests of shareholders, or else shareholders desire dividends sufficiently for nontax reasons to offset the tax effect. In this paper, we measure the relative valuation of dividends and capital gains in the stock market, using a variant of the capital asset pricing model. We find that dividends are not valued differently systematically from capital gains. This finding is consistent with share price maximization by firms but inconsistent with the fact that most shareholders pay a heavier tax on dividends. We also show that the relative value of dividends provides an indirect measure of a marginal Tobin's q. The measured value of dividends relative to capital gains tends to be higher during prosperous periods, as is consistent with this interpretation. We hope that this time series on a marginal Tobin's q will prove to be useful in forecasting the rate of investment.
Book Synopsis Dividend and Capital Gains Taxation in Firm Valuation : New Evidence by : Trevor S. Harris
Download or read book Dividend and Capital Gains Taxation in Firm Valuation : New Evidence written by Trevor S. Harris and published by . This book was released on 1997 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Taxation and the Stock Market Valuation of Capital Gains and Dividends by : Roger H. Gordon
Download or read book Taxation and the Stock Market Valuation of Capital Gains and Dividends written by Roger H. Gordon and published by . This book was released on 2010 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dividends seem to be more heavily taxed than capital gains. Why then do corporations pay dividends rather than repurchasing shares or retaining earnings? Either corporations are not acting in the interests of shareholders, or else shareholders desire dividends sufficiently for nontax reasons to offset the tax effect. In this paper, we measure the relative valuation of dividends and capital gains in the stock market, using a variant of the capital asset pricing model. We find that dividends are not valued differently systematically from capital gains. This finding is consistent with share price maximization by firms but inconsistent with the fact that most shareholders pay a heavier tax on dividends. We also show that the relative value of dividends provides an indirect measure of a marginal Tobin's q. The measured value of dividends relative to capital gains tends to be higher during prosperous periods, as is consistent with this interpretation. We hope that this time series on a marginal Tobin's q will prove to be useful in forecasting the rate of investment.
Book Synopsis Interpreting Ex-dividend Evidence by : James M. Poterba
Download or read book Interpreting Ex-dividend Evidence written by James M. Poterba and published by . This book was released on 1983 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor by : Leonie Bell
Download or read book New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor written by Leonie Bell and published by . This book was released on 2001 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Economic Effects of Dividend Taxation by : Kenneth James McKenzie
Download or read book The Economic Effects of Dividend Taxation written by Kenneth James McKenzie and published by . This book was released on 1996 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Impact of Investor-Level Taxation on Mergers and Acquisitions by : Eric Ohrn
Download or read book The Impact of Investor-Level Taxation on Mergers and Acquisitions written by Eric Ohrn and published by . This book was released on 2019 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investor-level taxation may distort merger and acquisition decisions when capital gains are taxed at a preferable rate, relative to dividends. The intuition is that the value of a target's assets depends on whether the target is acquired. If it is acquired, then the firm's equity is taxed at the capital gains rate. If, instead, the target is not acquired, then eventually the equity will be distributed as dividends and taxed at the dividend tax rate. This tax discount means acquisitions have a tax preference, relative to dividend payments, for potential acquiring firms that pay dividends. As a result, the tax discount distorts the mergers and acquisitions of dividend-payers, leading them to do more and lower quality deals. To test for the existence and effects of this tax discount on merger and acquisition behavior, we exploit quasi-experimental variation created by the Jobs Growth and Tax Relief Reconciliation Act of 2003, which equalized dividend and capital gains rates, eliminating the tax discount. We find that acquiring firms with larger tax discounts before 2003 made higher quality acquisitions after the discount was eliminated. These results support the existence of a tax discount prior to 2003 and suggest that re-implementing the same wedge between dividend and capital gains rates would cause lower quality acquisitions that would destroy approximately $59 billion of the value of mergers and acquisitions in the United States annually.
Book Synopsis Taxing Corporate Capital Gains by : Mihir A. Desai
Download or read book Taxing Corporate Capital Gains written by Mihir A. Desai and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Prof. Desai notes that a missing element in current debates over the appropriate taxation of capital income is the puzzling treatment of corporate capital gains. Given the rising importance of corporate capital gains and the unique distortions associated with them, he finds the oversight surprising. He notes that the taxation of corporate capital gains is associated with two types of economic distortions. First, the realization-based taxation of corporate capital gains discourages value-enhancing asset reallocation by creating a significant lock-in effect. Because unrealized U.S. corporate capital gains exceed $800 billion, there is a sizable economic cost associated with that lock-in effect.Second, such taxation discourages corporate investments by imposing a third layer of tax on top of the corporate income tax and the personal income tax on corporate income distributed to shareholders. Those distortions, he believes, are all the more notable because of the relief available for analogous transactions in other parts of the tax system. For example, he notes, capital gains earned by individuals are currently taxed at lower rates than apply to ordinary income and dividends received by corporations are afforded relief through the dividends-received deduction. Among his suggested alternatives to taxing corporate capital gains at the same rates as ordinary income are exempting corporate capital gains from taxation altogether or taxing corporate capital gains at preferential rates. Several other countries exempt corporate capital gains from taxation. Reforms to the U.S. taxation of capital gains, he believes, have the potential for sizable efficiency gains relative to other alternatives, given the magnitude of preexisting distortions from the current system of capital taxation. He calculates that a reduction of the corporate capital gains tax rate from 35 percent to 15 percent would be associated with $17 billion per year in efficiency gains.
Book Synopsis Marginal Stockholder Tax Effects and Ex-Dividend Day Behavior - Thirty-Two Years Later by : Edwin J. Elton
Download or read book Marginal Stockholder Tax Effects and Ex-Dividend Day Behavior - Thirty-Two Years Later written by Edwin J. Elton and published by . This book was released on 2010 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since Elton and Gruber's (Eamp;G) original article on taxes and ex-dividend price behavior was published in 1970, over 100 articles have appeared in the leading journals of financial economics examining whether prices fall by less than the dividends and, if so, whether or not the phenomenon is due to tax effects, market microstructure effects, or some other effect. The microstructure argument is the most serious alternative to the tax argument. All of the microstructure arguments state that the fall in stock price should be less than the dividend, regardless of whether the dividend is taxable or tax-advantaged. By testing ex-dividend effects on a sample of closed-end funds where dividends are taxadvantaged, we find that taxes should and do cause the fund price to fall by more than the amount of the dividend. This is consistent with a tax argument and inconsistent with a microstructure argument. Examining the sample of tax-free dividends, we find that the Eamp;G and return measures change across two tax regimes exactly as theory suggests they should if taxes mattered. We then examine non-tax-advantaged closed-end funds. For these funds we should find the traditional ex-dividend tax effects: the fall in price on the ex-dividend date should be less than the dividend during periods when capital gains taxes are less than income taxes. This is what we find. Furthermore, the ex-dividend behavior of these funds generally moves in the direction we would expect across two changes in tax regimes. The taxable sample not only substantiates the tax effect, it also demonstrates that the fall in price greater than the dividend for closed-end municipal bond funds was not due to some peculiar aspect of either our methodology or the closed-end fund industry. Thirty-two years after Eamp;G's original study, we find new and compelling evidence that taxes play an important part in affecting share price changes.
Book Synopsis Taxation and Corporate Payout Policy by : James M. Poterba
Download or read book Taxation and Corporate Payout Policy written by James M. Poterba and published by . This book was released on 2004 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents new evidence on how corporate payout policy responds to the differential between the tax burden on dividend income and that on accruing capital gains. It describes the construction of weighted average marginal tax rate series for the period since 1929, and it suggests that the enactment of the Job Growth of Taxpayer Relief Reconciliation Act of 2003 should raise the after-tax value of dividends relative to capital gains by more than five percentage points. The impact of this change on payout depends on the elasticity of dividend payments with respect to the after-tax value of dividend income relative to capital gains. Time series estimates suggest an elasticity of more than three, and imply that the recent tax reform could ultimately increase dividends by almost twenty percent.
Book Synopsis Taxation of Capital Gains and the Behavior of Stock Prices Over the Dividend Cycle by : Dan Palmon
Download or read book Taxation of Capital Gains and the Behavior of Stock Prices Over the Dividend Cycle written by Dan Palmon and published by . This book was released on 2013 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: By limiting their attention to the effect of capital gains tax on the price asked by mid-cycle sellers, Elton and Gruber (Review of Economics and Statistics v.52, 1970) overlook a parallel effect of capital loss credit on the bid price offered by mid-cycle buyers. We show that unequal marginal tax rates on capital gains and losses create two distinct price paths with a growing bid-ask spread between them. The dividend cycle ends with a corresponding drop of the dual price to a temporary common ex-dividend price. As perceived by shareholders, the mid-cycle bid-ask spread created in this fashion may add a significant trading cost beyond the observed market-price spread. Our analysis has important implications for shareholders' optimal timing of trade, the firm's optimal frequency and timing of dividends within the year, and government tax policy. A government seeking to tax capital gains should maintain parity between the tax rates of gains and losses to avoid the introduction of tax-induced trading costs. Absent rate parity, the firm should accommodate shareholders by following a predictable dividend schedule and avoiding extended intervals between dividends. Under this scenario, shareholders can avoid tax-induce trading costs by limiting their transactions to ex-dividend days.
Book Synopsis The Effect of Capital Gains Taxation on the Stock Market by : Edward A. Dyl
Download or read book The Effect of Capital Gains Taxation on the Stock Market written by Edward A. Dyl and published by . This book was released on 1973 with total page 330 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Ticks and Tax written by C. Bryan Cloyd and published by . This book was released on 2004 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine ex-dividend day stock price behavior before and after the NYSE converted from discrete (1/16ths) to decimal pricing systems in early 2001, as well as the effect of equalizing the federal income tax rates on dividend and long-term capital gain income in May 2003. Prior literature reports a robust empirical result that share prices decrease on the ex-dividend day by less than the amount of the dividend, but there is little agreement about whether this incomplete price adjustment is caused by share price discreteness, differential taxation of dividend income relative to capital gains, or other factors. Two recent studies, Graham, Michaely and Roberts (2003) and Jakob and Ma (2004), report that declining price discreteness (e.g. from 1/16ths to decimal pricing) had no material effect on the cum- to ex-day price-drop-to-dividend ratio. Although we report similar findings for the price-drop ratio, we find that ex-day abnormal returns declined significantly as a result of decimalization in 2001, and declined further in response to tax rate equalization in May 2003. Thus, our findings support the view that both price discreteness and differential taxation affect ex-dividend day stock price behavior.
Book Synopsis New Evidence that Taxes Affect the Valuation of Dividends by : James M. Poterba
Download or read book New Evidence that Taxes Affect the Valuation of Dividends written by James M. Poterba and published by . This book was released on 1984 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses British data to examine the effects of dividend taxes on investors' relative valuation of dividends and capital gains. British data offer great potential to illuminate the dividends and taxes question, since there have been two radical changes and several minor reforms in British dividend tax policy during the last twenty-five years. Studying the relationship between dividends and stockprice movements during different tax regimes offers an ideal controlled experiment for assessing the effects of taxes on investors' valuation of dividends. Using daily data on a small sample of firms, and monthly data on a much broader sample, we find clear evidence that taxes change equilibrium relationships between dividend yields and market returns. These findings suggest that taxes are important determinants of security market equilibrium, and deepen the puzzle of why firms pay dividends
