Dividend Taxes and Share Prices PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Dividend Taxes and Share Prices PDF full book. Access full book title Dividend Taxes and Share Prices by William M. Gentry. Download full books in PDF and EPUB format.
Author: William M. Gentry
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 37
Get Book Here
Book Description
Financial economists have debated the impact of dividend taxes on firm valuation for decades, but existing empirical evidence is mixed. In this study, we avoid certain complications inherent in previous empirical work by exploiting institutional characteristics of Real Estate Investment Trusts (REITs). For REITs, dividend policy is largely non-discretionary, share repurchases are not tax advantaged relative to dividends, and the market value of a firm's assets is relatively transparent to investors. In addition, REITs are exempt from corporate taxes, so their tax deductions flow directly to shareholders as reductions in dividend taxes. Within this environment, we regress the market value of a REIT's equity on the market value of its assets and its tax basis in assets, which creates tax deductions that lower future dividend taxes. We find that tax basis has a positive effect on firm value, which suggests that investors capitalize future dividend taxes into share prices
Author: William M. Gentry
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 37
Get Book Here
Book Description
Financial economists have debated the impact of dividend taxes on firm valuation for decades, but existing empirical evidence is mixed. In this study, we avoid certain complications inherent in previous empirical work by exploiting institutional characteristics of Real Estate Investment Trusts (REITs). For REITs, dividend policy is largely non-discretionary, share repurchases are not tax advantaged relative to dividends, and the market value of a firm's assets is relatively transparent to investors. In addition, REITs are exempt from corporate taxes, so their tax deductions flow directly to shareholders as reductions in dividend taxes. Within this environment, we regress the market value of a REIT's equity on the market value of its assets and its tax basis in assets, which creates tax deductions that lower future dividend taxes. We find that tax basis has a positive effect on firm value, which suggests that investors capitalize future dividend taxes into share prices
Author: William M. Gentry
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
Get Book Here
Book Description
Dividend taxes have stimulated decades of debate regarding firm valuation and the cost of equity capital. However, existing evidence is mixed. In this study, we take a new approach to examine the share price effects of dividend taxes that exploits institutional characteristics of Real Estate Investment Trusts (REITs), avoiding some of the complications inherent in previous empirical work. For REITs, dividend policy is largely non-discretionary, share repurchases do not offer tax advantages relative to dividends, and the market value of a firm's assets is relatively transparent to investors. In addition, REITs are exempt from corporate taxes, so their tax deductions flow directly to shareholders as reductions in dividend taxes. Within this environment, we regress the market value of a REIT's equity on the market value of its assets and its tax basis in assets, which creates tax deductions that lower future dividend taxes. We find that tax basis has a positive effect on firm value, which suggests that investors capitalize future dividend taxes into share prices.
Author: Stephen Bond
Publisher: International Monetary Fund
ISBN: 1451867689
Category : Business & Economics
Languages : en
Pages : 32
Get Book Here
Book Description
We re-examine the extent to which personal taxes on dividends are capitalized into the equity prices of domestic firms, using data from around the time of the 1997 U.K. dividend tax reform, which removed a significant tax credit for an important group of investors: U.K. pension funds. The tax-adjusted CAPM suggests that the impact should depend on an average of dividend tax rates across all investors, and that U.K. pension funds should reduce their holdings of the previously tax-favored asset: U.K. equities. Given that U.K. pension funds are small relative to the total size of the world capital market, a small open economy-type argument implies that the main effect of the reform would be to reduce U.K. pension funds' ownership of U.K. equities, with little impact on their price. We present evidence which is consistent with these hypotheses. We discuss why previous research (Bell and Jenkinson, 2002) reached a different conclusion.
Author: Trevor S. Harris
Publisher:
ISBN:
Category : Corporate profits
Languages : en
Pages : 44
Get Book Here
Book Description
We examine the hypothesis that dividend taxes are capitalized into share prices by focusing on investors' implicit valuations of retained earnings versus paid-in equity. Retained earnings are distributable as taxable dividends, whereas paid-in equity is distributable as a tax-free return of capital. Consistent with dividend tax capitalization, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. In addition, differences in dividend tax rates across U.S. tax regimes are associated with predictable differences in the magnitude of the implied tax discount for retained earnings, as are differences in dividend tax rates across Australia, Japan, France, Germany, and the United Kingdom
Author: William B. Brueggeman
Publisher: Irwin Professional Pub
ISBN: 9780072977363
Category : Business & Economics
Languages : en
Pages : 640
Get Book Here
Book Description
Real Estate Finance & Investments is today's most indispensable, hands-on look at the increasingly vital arena of real estate partnerships, secondary mortgage markets, and fixed- and adjustable- rate mortgages. Updates to this edition include completely revised coverage of REITs, expanded coverage of CMBS, more detail on how underlying economic factors affect property value, and short readings based on current events.
Author: Kenneth James McKenzie
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 40
Get Book Here
Book Description
Author: Trevor S. Harris
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
Get Book Here
Book Description
We examine the hypothesis that dividend taxes are capitalized into share prices by focusing on investors' implicit valuations of retained earnings versus paid-in equity. Retained earnings are distributable as taxable dividends, whereas paid-in equity is distributable as a tax-free return of capital. Consistent with dividend tax capitalization, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. In addition, differences in dividend tax rates across U.S. tax regimes are associated with predictable differences in the magnitude of the implied tax discount for retained earnings, as are differences in dividend tax rates across Australia, Japan, France, Germany, and the United Kingdom.
Author: Board of Governors of the Federal Reserv
Publisher: Createspace Independent Publishing Platform
ISBN: 9781523423903
Category :
Languages : en
Pages : 38
Get Book Here
Book Description
Often when we discuss the effects of taxes, we focus on the effects on the mean of firm value and de-emphasize the effects on the variance of the distribution. The existing literature on dividend taxation has analyzed the effect on firm stock price (Auerbach and Hassett (2005) and Amromin, Harrison and Sharpe (2008)). However, there are two important moments for the stock: the level of the stock price and the volatility of the stock. In a world where executives are more risk averse than most shareholders (since they are unable to diversify away firm-speciffc risk), we want to focus on both the mean and the variance effects due to agency costs. If a dividend tax change suffciently increases volatility, the executive may take actions to decrease the volatility of the stock at the expense of the share price. Therefore, the stock price might not increase as much as it would have in a world with risk-neutral executives (or equally risk averse executives and shareholders). It is therefore important to consider the effects on the volatility of the stock.
Author: James M. Poterba
Publisher:
ISBN:
Category : Capital investments
Languages : en
Pages : 66
Get Book Here
Book Description
Taxes on corporate distributions have traditionally been regarded as a "double tax" on corporate income. This view implies that while the total effective tax rate on corporate source income affects real economic decisions, the distribution of this tax burden between the shareholders and the corporation is irrelevant. Recent research has suggested an alter- native to this traditional view. One explanation of why firms in the U.S. pay dividends in spite of the heavy tax liabilities associated with this form of distribution is that the stock market capitalizes the tax payments associated with corporate distributions. This capitalization leaves investors indifferent at the margin between corporations paying our dividends and retaining earnings. This alternative view holds that while changes in the dividend tax rate will affect shareholder wealth, they will have no impact on corporate investment decisions. This paper develops econometric tests which distinguish between these two views of dividend taxation. By extending Tobin's "q" theory of investment to incorporate taxes at both the corporate and personal levels, the implications of each view for corporate investment decisions can be derived. The competing views may be tested by comparing the performance of investment equations estimates under each theory's predict ions. British time series data are particularly appropriate for testing hypotheses about dividend taxes because of the substantial postwar variation in effective tax rates on corporate distributions. The econometric results suggest that dividend taxes have important effects on investment decisions.
Author: Laurence Earl Blose
Publisher:
ISBN:
Category : Dividends
Languages : en
Pages : 178
Get Book Here
Book Description
