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INCOME TAXATION REGULATION AND COMPANIES’ BEHAVIOUR: IS THE ROMANIAN COMPANIES’ DIVIDEND POLICY INFLUENCED BY THE CHANGES IN INCOME TAXATION?

Mihaela Dragota (), Victor Dragotă (), Lucian Tatu and Delia Tatu ()
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Mihaela Dragota: Department of Finance, Academy of Economic Studies, Bucharest, Romania
Delia Tatu: Department of Economics, Academy of Economic Studies, Bucharest

Authors registered in the RePEc Author Service: Ingrid-Mihaela Dragota ()

Journal for Economic Forecasting, 2009, vol. 6, issue 1, 76-93

Abstract: This paper analyzes the dividend payout by Romanian companies listed on the Bucharest Stock Exchange in connection with the changes in corporate taxes. If the tax burden on corporate gross incomes is increasing, the companies’ management can follow two reasons in deciding the dividend payout: to allocate more for investments, or to increase the dividend ratio. Each of these decisions can be argued based on Corporate Finance principles, depending on the management objectives. This paper found no significant correlation between the dividend policy and the corporate tax burden. However, the dividend payout reacted when the regulations related to the tax treatment of incomes were changed in 2005. Moreover, the dividend policy seems to be sensitive to the ownership structure, which can be explained by the impact of some agency problems.

Keywords: dividend payout; taxation; agency problem; emergent markets (search for similar items in EconPapers)
JEL-codes: G34 G35 G38 (search for similar items in EconPapers)
Date: 2009
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