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Individual investors’ dividend tax reform and stock price crash risk

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  • Yang, Xinyao
  • Liu, Zhaoyi
  • Li, Tao

Abstract

This paper examines the effect of individual investors’ dividend tax on stock price crash risk. By introducing the implementation of dividend tax reform (DTR) for individual investors, we present strong evidence that the reduction of the individual investors' dividend tax reduces the stock price crash risk. Mechanism analysis shows that DTR reduces the stock price crash risk by enhancing investor supervision and reducing the stock selling behavior of executives. Furthermore, DTR also reduce the stock price synchronicity. By revealing the effect of the individual investors’ DTR on stock price crash risk, our study presents a clear policy to regulators concerned with high-quality development of the capital market.

Suggested Citation

  • Yang, Xinyao & Liu, Zhaoyi & Li, Tao, 2023. "Individual investors’ dividend tax reform and stock price crash risk," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001198
    DOI: 10.1016/j.frl.2023.103746
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    References listed on IDEAS

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    1. Raj Chetty & Emmanuel Saez, 2005. "Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 791-833.
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    More about this item

    Keywords

    Dividend tax reform; Individual investor; Stock price crash risk; Capital market efficiency;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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