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Stockholder Tax Rates and Firm Attributes

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  • Alan J. Auerbach

Abstract

This paper develops a rigorous theoretical model to assess when investor clienteles may be empirically identified using ex dividend day data and what firm attributes these clienteles should respond to. It then presents empirical results for the period 1963-1977 suggesting that (1) tax-based investor clienteles do exist, and are reasonably stable over time (2) these clienteles are strongly influenced by the dividend-price ratio, but insignificantly by direct measures of risk and other firm characteristics.

Suggested Citation

  • Alan J. Auerbach, 1981. "Stockholder Tax Rates and Firm Attributes," NBER Working Papers 0817, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0817
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    References listed on IDEAS

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    1. Bradford, David F., 1981. "The incidence and allocation effects of a tax on corporate distributions," Journal of Public Economics, Elsevier, vol. 15(1), pages 1-22, February.
    2. Lewellen, Wilbur G, et al, 1978. "Some Direct Evidence on the Dividend Clientele Phenomenon," Journal of Finance, American Finance Association, vol. 33(5), pages 1385-1399, December.
    3. Jerry R. Green, 1980. "Taxation and the Ex-Dividend Day Behavior of Common Stock Prices," NBER Working Papers 0496, National Bureau of Economic Research, Inc.
    4. Litzenberger, Robert H & Ramaswamy, Krishna, 1980. "Dividends, Short Selling Restrictions, Tax-Induced Investor Clienteles and Market Equilibrium," Journal of Finance, American Finance Association, vol. 35(2), pages 469-482, May.
    5. Gordon, Roger H. & Bradford, David F., 1980. "Taxation and the stock market valuation of capital gains and dividends : Theory and emphirical results," Journal of Public Economics, Elsevier, vol. 14(2), pages 109-136, October.
    6. Elton, Edwin J & Gruber, Martin J, 1970. "Marginal Stockholder Tax Rates and the Clientele Effect," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 68-74, February.
    7. Alan J. Auerbach, 1979. "Wealth Maximization and the Cost of Capital," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 433-446.
    8. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
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    Cited by:

    1. Frankfurter, George M. & Wood, Bob Jr., 2002. "Dividend policy theories and their empirical tests," International Review of Financial Analysis, Elsevier, vol. 11(2), pages 111-138.
    2. Poterba, James M & Summers, Lawrence H, 1984. "New Evidence that Taxes Affect the Valuation of Dividends," Journal of Finance, American Finance Association, vol. 39(5), pages 1397-1415, December.
    3. Ahmad Ahmadpour & Mahmoud yahyazadefar & Babak Garmroudi, 2006. "The Influence of Agency Costs on Dividend Policy in an Emerging Market: “Evidence from the Tehran Stock Exchange”," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 11(1), pages 59-80, winter.
    4. Matthew Smith & Owen Zidar & Eric Zwick, 2020. "Top Wealth in America: New Estimates and Implications for Taxing the Rich," Working Papers 264, Princeton University, Department of Economics, Center for Economic Policy Studies..
    5. James M. Poterba & Lawrence H. Summers, 1984. "The Economic Effects of Dividend Taxation," Working papers 343, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Graham, John R., 1999. "Do personal taxes affect corporate financing decisions?," Journal of Public Economics, Elsevier, vol. 73(2), pages 147-185, August.
    7. Auerbach, Alan J., 2002. "Taxation and corporate financial policy," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 19, pages 1251-1292, Elsevier.
    8. Modén, Karl-Markus, 1989. "Taxes and Mergers in Sweden," Working Paper Series 242, Research Institute of Industrial Economics.
    9. James M. Poterba, 1983. "Interpreting Ex-Dividend Evidence: The Citizens Utilities Case Reconsidered," NBER Working Papers 1131, National Bureau of Economic Research, Inc.
    10. Poterba, James M., 2002. "Taxation, risk-taking, and household portfolio behavior," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 17, pages 1109-1171, Elsevier.
    11. Jeffrey K. MacKie-Mason, 1990. "Do Firms Care Who Provides Their Financing?," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 63-104, National Bureau of Economic Research, Inc.
    12. Morgan, Gareth & Thomas, Stephen, 1998. "Taxes, dividend yields and returns in the UK equity market," Journal of Banking & Finance, Elsevier, vol. 22(4), pages 405-423, May.
    13. Francisco Gonzalez Rodriguez, 1995. "La reacción de los precios de las acciones ante anuncios de dividendos: la evidencia empírica en el mercado español de valores," Investigaciones Economicas, Fundación SEPI, vol. 19(2), pages 249-268, May.

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