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Do dividend taxes affect corporate investment?

Annette Alstadsæter (), Martin Jacob and Roni Michaely

Journal of Public Economics, 2017, vol. 151, issue C, 74-83

Abstract: We test whether dividend taxes affect corporate investments. We exploit Sweden's 2006 dividend tax cut of 10 percentage points for closely held corporations and 5 percentage points for widely held corporations. Using rich administrative panel data and triple-difference estimators, we find that this dividend tax cut does not affect aggregate investment but that it affects the allocation of corporate investment. Cash-constrained firms increase investment after the dividend tax cut relative to cash-rich firms. Reallocation is stronger among closely held firms that experience a larger tax cut. This result is explained by higher external equity in cash-constrained firms and by higher dividends in cash-rich firms after the tax cut.

Keywords: Investment; Dividend taxation; Private Firms (search for similar items in EconPapers)
JEL-codes: G30 G31 H25 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Do Dividend Taxes Affect Corporate Investment? (2014) Downloads
Working Paper: Do dividend taxes affect corporate investment? (2014) Downloads
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