Individual Wealth Taxes and Corporate Payouts

Raúl Barroso (), Donald N'Gatta and Gaizka Ormazabal
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Raúl Barroso: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique
Donald N'Gatta: IESE Business school - University of Navarra
Gaizka Ormazabal: IESE Business school - University of Navarra

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Abstract: We examine the effect of individual wealth taxes on dividend policy. Using a comprehensive sample of European public firms from 26 countries, we document that wealth taxes paired with substantial increases in stock prices are associated with a significant increase in dividend payouts. This pattern is stronger among closely held firms, family firms, and firms with shares directly owned by individuals. We also find evidence suggesting that the dividends induced by wealth taxes have meaningful economic consequences; the announcement of dividends with a higher probability of being induced by wealth taxes elicits lower stock returns, and such dividends are associated with lower levels of subsequent investment. Overall, our evidence contributes to the rekindled debate on wealth taxes by showing that this type of taxation affects corporate financial policies.

Keywords: Individual wealth taxes; Corporate payouts; Dividend policy (search for similar items in EconPapers)
Date: 2022-12-11
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Published in Accounting Review, 2022, ⟨10.2308/TAR-2021-0475⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03975042

DOI: 10.2308/TAR-2021-0475

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