The value of a flow-through entity in an integrated corporate tax system

Alexander Edwards and Terry Shevlin

Journal of Financial Economics, 2011, vol. 101, issue 2, 473-491

Abstract: In an integrated corporate tax system, resident shareholders receive a tax credit for corporate tax paid that can be used to offset personal tax on dividend income. Nonresident and tax-exempt (pension plan) investors cannot use the tax credit on corporate dividends and thus prefer to invest in flow-through entities. We estimate the value of the flow-through entity to nonresident and pension plan investors by examining the price change around the date of an unexpected announcement of a change in tax law related to Canadian publicly traded income trusts units creating an entity-level tax that makes them no longer tax-favored to these investors.

Keywords: Corporate; tax; integration; Flow-through; Entity; Tax; clienteles; Implicit; taxes (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:101:y:2011:i:2:p:473-491

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