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Department of Economics, Uppsala University Working Paper Series, Uppsala Center for Fiscal Studies, Department of Economics, Uppsala University

No 2010:10:
Taxation, Dividends, and Share Repurchases: Taking Evidence Global

Martin Jacob ()

Abstract: We compile a comprehensive international dividend and capital gains tax data set to study tax explanations of corporate payouts for a panel of 5,767 firms from 25 countries for 1990-2008. We find robust evidence that the tax penalty on dividends versus capital gains is statistically significant and negatively related to firms’ propensity to pay dividends, initiate such payments, and the amount of dividends paid. Our analysis further reveals that an increase in the dividend tax penalty raises firms’ likelihood to repurchase shares, initiate such repurchases, and the amount of shares repurchased. This is strong confirming evidence that when listed industrial firms globally design their payout policies, they take into careful consideration the relative tax implications of their payout choices.

Keywords: Taxation; Dividends; Stock Repurchases; Payout Policy; (follow links to similar papers)

JEL-Codes: G10; G15; G30; G35; H24; H25; (follow links to similar papers)

38 pages, September 22, 2010

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