Do foreign firms cater to American investors’ dividend desires ?

Tat-Kei Lai, Travis Ng and Kwok Ping Tsang
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Tat-Kei Lai: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - ULCO - Université du Littoral Côte d'Opale - Université de Lille - CNRS - Centre National de la Recherche Scientifique
Travis Ng: CUHK - The Chinese University of Hong Kong
Kwok Ping Tsang: Virginia Tech [Blacksburg]

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Abstract: Will foreign firms alter their dividend policies to cater to minority American investors' tax preferences? Conceptually, in the context of foreign controlling shareholders making the tunneling-and-dividend decisions, foreign firms will not do so unless they value a broad American shareholder base. During a U.S. tax cut that increases American investors' dividend desires only from qualified foreign corporations (QFCs), the dividend policies of those QFCs domiciled in low withholding tax jurisdictions exhibit a significantly stronger catering pattern than others. The conceptual framework and the empirical results jointly suggest that some foreign firms see the value of a broad American shareholder base.

Keywords: Theory of the firm; Foreign ownership; Controlling shareholder; Corporate governance; Tax policies (search for similar items in EconPapers)
Date: 2025-09
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Published in Journal of International Money and Finance, 2025, 158, pp.103406. ⟨10.1016/j.jimonfin.2025.103406⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05370747

DOI: 10.1016/j.jimonfin.2025.103406

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