The impact of the dividend tax cut and managerial stock holdings on corporate dividend policy

Jouahn Nam, Jun Wang and Ge Zhang
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Jouahn Nam: Pace University
Jun Wang: Baruch College
Ge Zhang: University of New Orleans

No 2004-09, Working Papers from University of New Orleans, Department of Economics and Finance

Abstract: We examine the impact of the May 2003 dividend tax cut and managerial stock holdings on corporate dividend initiation decision. We find that managers who hold sizable stakes in their companies are more likely to initiate dividends following this tax cut. This positive relation is stronger for firms with higher growth opportunities. These results are consistent with the hypothesis that managers initiate dividends to maximize their own wealth. Moreover, the market reacts negatively (most positively) to dividend initiation announcements by firms with higher (lower) growth opportunities and higher (lower) managerial share holdings.

Keywords: Dividend tax cut; Managerial stock holdings; Dividend payout (search for similar items in EconPapers)
JEL-codes: G30 G35 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-fmk
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