Dividends, Capital Gains, and the Corporate Veil: Evidence from Britain, Canada, and the United States

James Poterba

No 2975, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the effects of increased cash dividend payout, and of "forced realizations~ of capital gains in corporate control transactions, on the level of aggregate consumption. The results support the proposition that investors respond differently to cash receipts from firms and to accruing capital gains. Consistent but weak evidence for the United States, Great Britain, and Canada suggests that higher dividend tax rates lower consumption. This is consistent with such tax rates increasing corporate saving, while households fail to completely pierce the corporate veil and therefore reduce their consumption. Time series evidence from the U.S. and the U.K. also suggests that "forced realizations" of capital gains in takeovers may spur consumption, indicating a relatively unexplored link between corporate financial decisions and aggregate consumption.

Date: 1989-05
Note: PE
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Published as Bernheim, B. Douglas and John B. Shoven (eds.) National Saving and Economic Performance. Chicago: The University of Chicago Press, 1991.
Published as Dividends, Capital Gains, and the Corporate Veil: Evidence from Britain, Canada, and the United States , James M. Poterba. in National Saving and Economic Performance , Bernheim and Shoven. 1991

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Related works:
Chapter: Dividends, Capital Gains, and the Corporate Veil: Evidence from Britain, Canada, and the United States (1991)
Working Paper: DIVIDENDS, CAPITAL GAINS AND THE CORPORATE VEIL: EVIDENCE FROM BRITAIN, CANADA AND THE UNITED STATES (1989)
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