Equity closed‐end fund discounts and taxes

Shishir Paudel, Sabatino (Dino) Silveri and Mark Wu

Review of Financial Economics, 2023, vol. 41, issue 3, 269-282

Abstract: After documenting CRSP errors in classifying the tax status of distributions, we make use of two important institutional features that the related literature has ignored: (i) tax rate changes and (ii) non‐taxable distributions. We find that taxable distributions lead to discount reductions, and the reduction is greater during high tax periods than during low tax periods. By contrast, non‐taxable distributions have no discernible impact on the discount, consistent with a tax‐based explanation. Importantly, we are able to rule out a competing short‐term trading hypothesis. Taken together, our results highlight the importance of personal taxes in explaining closed‐end fund discounts.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/rfe.1175

Related works:
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: https://EconPapers.repec.org/RePEc:wly:revfec:v:41:y:2023:i:3:p:269-282

Access Statistics for this article

More articles in Review of Financial Economics from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().