The Share Price Effects of Dividend Taxes and Tax Imputation Credits

Trevor S. Harris, Robert Glenn Hubbard () and Deen Kemsley

No 7445, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the hypothesis that dividend taxes are capitalized into share prices by focusing on investors' implicit valuations of retained earnings versus paid-in equity. Retained earnings are distributable as taxable dividends, whereas paid-in equity is distributable as a tax-free return of capital. Consistent with dividend tax capitalization, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. In addition, differences in dividend tax rates across U.S. tax regimes are associated with predictable differences in the magnitude of the implied tax discount for retained earnings, as are differences in dividend tax rates across Australia, Japan, France, Germany, and the United Kingdom.

JEL-codes: H3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-pub
Date: 1999-12
Note: AP PE
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w7445.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: The Share Price Effects of Dividend Taxes and Tax Imputation Credits (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:7445

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w7445
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().