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Tax preferences of investors and fund investments

Author

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  • Yadav, Vijay

Abstract

Funds must distribute all dividends and net realized short-term and long-term capital gains to their investors each year. Investors have to pay tax on these distributions. We find that funds whose distributions are taxable pay lower dividends than funds whose distributions are tax-deferred. Taxable funds also distribute relatively lower short-term and long-term capital gains. This suggests that funds take into account the tax preferences of their investors in making investment decisions.

Suggested Citation

  • Yadav, Vijay, 2016. "Tax preferences of investors and fund investments," Economics Letters, Elsevier, vol. 143(C), pages 90-93.
    • Handle: RePEc:eee:ecolet:v:143:y:2016:i:c:p:90-93
    DOI: 10.1016/j.econlet.2016.03.026
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    Cited by:

    1. Lu, Shuai & Li, Shouwei & Chen, Ning, 2022. "Robust return efficiency and herding behavior of fund managers," Finance Research Letters, Elsevier, vol. 46(PA).

    More about this item

    Keywords

    Mutual funds; Dividends; Distributions; Taxes;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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