Citation
American Psychological Association 7th edition (APA 7th)
🇺🇸 English, US
Isakov, D., Pérignon, C., & Weisskopf, J.-P. (2021). What If Dividends Were Tax-Exempt? Evidence from a Natural Experiment. The Review of Financial Studies, 34(12), 5756–5795. https://doi.org/10.1093/rfs/hhab010
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Résumé
We study the effect of dividend taxes on the payout and investment policies of publicly listed firms. We exploit a unique setting in Switzerland where, following the corporate tax reform of 2011, some but not all firms were suddenly able to pay tax-exempt dividends. We show that treated firms increase their dividend payout by around 30% after the tax cut. The impact on payout is less pronounced for firms prone to agency conflicts. We find a significant positive abnormal stock return after the announcement of the payment of a tax-exempt dividend. However, reducing dividend taxes does not boost investment.