Direct evidence of dividend tax clienteles

Magnus Dahlquist, Göran Robertsson and Kristian Rydqvist

Journal of Empirical Finance, 2014, vol. 28, issue C, 1-12

Abstract: The paper is the first to evaluate the dividend tax clientele hypothesis using a data set of all domestic stock portfolios in the market. We find that investment funds that face a higher effective tax rate on dividend income than on capital gains tilt their portfolios away from dividend-paying stocks. These investors consequently earn a dividend yield that is about 35 basis points lower than that of investors who are tax neutral between dividends and capital gains (pension funds, unit-linked insurance, life insurance). Consistent with tax rules and charter provisions, we also find that private corporations prefer growth stocks, that foundations exhibit strong dividend preferences, and that partnerships rarely hold stocks portfolios.

Keywords: After-tax CAPM; Stock ownership; Institutional investors; Private corporations; Foundations; Partnerships (search for similar items in EconPapers)
JEL-codes: G11 G35 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:28:y:2014:i:c:p:1-12

DOI: 10.1016/j.jempfin.2014.05.003

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