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Taxes, Earnings Payout, and Payout Channel Choice

Author

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  • Philipp Geiler

    (EM - EMLyon Business School)

  • Luc Renneboog

Abstract

We study the tax regulations in relation to dividends and capital gains over the last two decades for the UK in order to determine whether changes in tax regimes affect corporate payout policy (dividends, share repurchases, or a combination). While we can identify investors' tax-driven preferences for a specific payout channel, we find no evidence of tax-induced clienteles. Firms do indeed not cater to the tax preferences of their shareholders (including individuals, pension funds, corporations). Other factors, such as equity-based compensation received by the CEO and investor sentiment in the form of optimism reduce the dividend payout and increase the use of share repurchases.

Suggested Citation

  • Philipp Geiler & Luc Renneboog, 2015. "Taxes, Earnings Payout, and Payout Channel Choice," Post-Print hal-02313270, HAL.
    • Handle: RePEc:hal:journl:hal-02313270
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    Cited by:

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    2. Feito-Ruiz, Isabel & Renneboog, Luc & Vansteenkiste, Cara, 2020. "Elective stock and scrip dividends," Journal of Corporate Finance, Elsevier, vol. 64(C).
    3. Driver, Ciaran & Grosman, Anna & Scaramozzino, Pasquale, 2020. "Dividend policy and investor pressure," Economic Modelling, Elsevier, vol. 89(C), pages 559-576.
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    5. Varvara V. Nazarova & Anastasia A. Ivanova, 2022. "Payment to Investors Policy Choice: US Market Research," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 1, pages 89-107, February.
    6. Szládek, Dániel, 2024. "Osztalékfizetés helyett részvény-visszavásárlás?. A részvény-visszavásárlások népszerűségének lehetséges okai [Share repurchases instead of dividend payments?. The evolution of payout policies and ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 154-175.
    7. Duygun, Meryem & Guney, Yilmaz & Moin, Abdul, 2018. "Dividend policy of Indonesian listed firms: The role of families and the state," Economic Modelling, Elsevier, vol. 75(C), pages 336-354.
    8. Abdullah AlGhazali & Khamis Hamed Al-Yahyaee & Richard Fairchild & Yilmaz Guney, 2024. "What do dividend changes reveal? Theory and evidence from a unique environment," Review of Quantitative Finance and Accounting, Springer, vol. 62(2), pages 499-552, February.

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    More about this item

    Keywords

    Payout policy; Dividends; Share repurchases; Taxation; Regulation;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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