Corporate Investment and Dividend Tax Imputation

Glenn Boyle ()

The Financial Review, 1996, vol. 31, issue 1, 209-26

Abstract: The capital investment/dividend decision of the firm is analyzed under alternative assumptions about the system of dividend taxation. Relative to the classical system, imputation can yield (1) more disagreement amongst shareholders as regards the optimal investment plan, (2) less capital investment on aggregate, and (3) fewer gains from mergers. Moreover, in contrast to the classical system, shareholders with high marginal tax rates can be more disadvantaged by dividend deferral than shareholders with low marginal tax rates. Copyright 1996 by MIT Press.

Date: 1996
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