[PDF] Corporate Dividend Policy And Tax Avoidance eBook

Author : Mark C. Anderson
Publisher :
Page : 0 pages
File Size : 18,82 MB
Release : 2023
Category :
ISBN :

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This article investigates the relation between corporate dividend policy and tax avoidance. The payment of dividends facilitates the transfer of corporate resources, usually cash, from the company to its shareholders. An important aspect of dividend policy is that it is used to address agency problems between shareholders and managers associated with free cash flow. Given that a dividend payment policy is generally considered to be a fixed commitment, and managers may be penalized for cutting dividends, managers may adopt a tax-avoidance strategy to generate additional cash flow to meet this obligation and to fund operating and investment needs. Using data for US publicly listed corporations, we first document that a higher dividend payout ratio is associated with a lower cash-payment-based effective tax rate and a higher book-tax difference, indicating a higher level of tax avoidance. We then test whether tax avoidance increased with the initiation of dividends that occurred in response to the 2003 US dividend income tax cut, and find that it did. The results support our prediction that dividend policy affects tax planning. We employ a Heckman two-stage procedure to address other endogeneities. We also show that our baseline results are robust when an extensive set of tests is applied, including alternative measures of tax avoidance and dividend payout. In addition, we find that the relation between dividend payout and measures of tax avoidance is stronger for firms that experience a non-trivial increase in the dividend payout ratio and that have low institutional ownership, high leverage, and low operating cash flow. Overall, our findings provide persuasive evidence that dividend policy affects the distribution of surplus among shareholders, managers, and the tax authority.

Author : Dan Amiram
Publisher :
Page : 61 pages
File Size : 21,6 MB
Release : 2018
Category :
ISBN :

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We exploit changes in a country's integration of corporate and shareholder taxes to identify the effect of investor-level taxes on costly corporate tax avoidance. Specifically, we rely on European countries eliminating imputation systems in different years in response to supranational judicial rulings. These eliminations, which are exogenous to the firm, remove managers' disincentive to engage in tax avoidance if they consider investor-level taxes. Using a difference-in-differences model with fixed effects, we find that the average firm affected by an elimination reduces its cash effective tax rate by 5.5 percent. Placebo tests support that this effect is present only for countries and years for which eliminations occur. Consistent with our cross-sectional predictions, we find that the results are stronger for firms with lower growth opportunities, higher dividend payout, lower foreign income, and higher closely held ownership. Further analysis provides evidence consistent with shifting income to foreign countries as one method of tax avoidance employed.

Author : Alan J. Auerbach
Publisher : Cambridge University Press
Page : 401 pages
File Size : 13,36 MB
Release : 2007-04-16
Category : Business & Economics
ISBN : 1139464515

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This book was first published in 2007. Most countries levy taxes on corporations, but the impact - and therefore the wisdom - of such taxes is highly controversial among economists. Does the burden of these taxes fall on wealthy shareowners, or is it passed along to those who work for, or buy the products of, corporations? Can a country with high corporate taxes remain competitive in the global economy? This book features research by leading economists and accountants that sheds light on these and related questions, including how taxes affect corporate dividend policy, stock market value, avoidance, and evasion. The studies promise to inform both future tax policy and regulatory policy, especially in light of the Sarbanes-Oxley Act and other actions by the Securities and Exchange Commission that are having profound effects on the market for tax planning and auditing in the wake of the well-publicized accounting scandals in Enron and WorldCom.

Author : George Frankfurter
Publisher : Elsevier
Page : 249 pages
File Size : 26,29 MB
Release : 2003-06-24
Category : Business & Economics
ISBN : 0080488730

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Dividend Policy provides a comprehensive study of dividend policy. It explores the puzzle presented by dividends: irrational and subject to fashion, yet popular and desirable, they remain a priority among managers, even while perceived as largely symbolic. After exploring the history of dividend payments, from the emergence of the modern corporation to current perspectives, it traces the evolution of academic models on dividend policy. Here the authors review models of symmetric and asymmetric information before analyzing academia's accomplishments in solving the dividend puzzle. Related subjects, such as valuation and wealth distribution, round out the authors' presentation about new ways to think about one of the most intriguing subjects in financial economics. The book is recommended for professors and students in departments of finance and business, corporate finance staff, and financial regulators. The only comprehensive study of dividend policy Covers the historical evolution of dividends and academic research on dividend policy Presents new ways of thinking about dividends and dividend policy

Author : Randall Morck
Publisher :
Page : 66 pages
File Size : 40,80 MB
Release : 2004
Category : Dividends
ISBN :

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Arguments for eliminating the double taxation of dividends apply only to dividends paid by corporations to individuals. The double (and multiple) taxation of dividends paid by one firm to another -- intercorporate dividends - was explicitly included in the 1930s as part of a package of tax and other policies aimed at eliminating United States pyramidal business groups. These structures remain the predominant form of corporate organization outside the United States. The first Roosevelt administration associated them with corporate governance problems, corporate tax avoidance, market power, and an objectionable concentration of economic power. Future tax reforms in the United States should mind the original intent of Congress and the President regarding intercorporate dividend taxation. Foreign governments may find the American experience of value should they desire to eliminate their business groups.

Author : Sebastian Beer
Publisher : International Monetary Fund
Page : 45 pages
File Size : 47,79 MB
Release : 2018-07-23
Category : Business & Economics
ISBN : 148436399X

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This paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations. It surveys evidence on main channels of corporate tax avoidance including transfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions. Moreover, it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting. We find that the literature suggests that, on average, a 1 percentage-point lower corporate tax rate will expand before-tax income by 1 percent—an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time. The literature on tax avoidance still has several unresolved puzzles and blind spots that require further research.

Author : Luis Correia da Silva
Publisher : Oxford University Press, USA
Page : 200 pages
File Size : 29,89 MB
Release : 2004-02-26
Category : Business & Economics
ISBN : 0199259305

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An analysis of the extent to which dividend payout policy differs from country to country. In particular the authors investigate the differences between the UK market-oriented and the German blockholder-oriented systems.

Author : Randall Morck
Publisher :
Page : 45 pages
File Size : 37,23 MB
Release : 2013
Category :
ISBN :

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Arguments for eliminating the double taxation of dividends apply only to dividends paid by corporations to individuals. The double (and multiple) taxation of dividends paid by one firm to another -- intercorporate dividends - was explicitly included in the 1930s as part of a package of tax and other policies aimed at eliminating United States pyramidal business groups. These structures remain the predominant form of corporate organization outside the United States. The first Roosevelt administration associated them with corporate governance problems, corporate tax avoidance, market power, and an objectionable concentration of economic power. Future tax reforms in the United States should mind the original intent of Congress and the President regarding intercorporate dividend taxation. Foreign governments may find the American experience of value should they desire to eliminate their business groups.