New evidence of the impact of dividend taxation and on the identity of the marginal investor

Leonie Bell and Tim Jenkinson

OFRC Working Papers Series from Oxford Financial Research Centre

Abstract: This paper examines the impact of a major change in dividend taxation introduced in the UK in July 1997. The reform was structured in such a way that the immediate impact fell almost entirely on the largest investor class in the UK, namely pension funds. We analyse the behaviour of share prices around the ex-dividend day both before and after the reform to test clientele effects and the impact of taxation on the valuation of companies. We find strong clientele effects in the UK, which are consistent with the distortions introduced by the tax system (before the reform dividend income was tax-advantaged in the UK). We also find significant changes in the valuation of dividend income after the reform, in particular for high-yielding companies. These results provide strong support for the hypothesis that taxation affects the valuation of companies, and that pension funds were the effective marginal investors for high-yielding companies.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.finance.ox.ac.uk/file_links/finecon_papers/2001fe14.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.finance.ox.ac.uk:80 (No such host is known. )

Related works:
Journal Article: New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor (2002)
Working Paper: New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor (2001)
Working Paper: New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sbs:wpsefe:2001fe14

Access Statistics for this paper

More papers in OFRC Working Papers Series from Oxford Financial Research Centre Contact information at EDIRC.
Bibliographic data for series maintained by Maxine Collett ().