Dividend Taxation and Firm Performance with Heterogeneous Payout Responses

Arbeitspapier

We analyze the short and long-run performance of firms that were differentially affected by a new tax on dividends in the lead-up to the Global Financial Crisis. We use exogenous policy variation for firms with different legal statuses and financial year-end dates to causally identify the policy impact. Consistent with intertemporal tax arbitrage, immediately-affected firms significantly reduce payouts. At a time of severe liquidity shortage, the average firm uses the undistributed cash to pay back debt. In the long run, the allocation of undistributed cash to investment, retained earnings, and debt repayment predicts growth and the likelihood of bankruptcy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10185

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policies and Behavior of Economic Agents: Firm ; Business Taxes and Subsidies including sales and value-added (VAT) ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Portfolio Choice; Investment Decisions
• Subject: dividend tax ; firm survival ; investment ; intertemporal tax arbitrage

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bilicka, Katarzyna ; Güçeri, Irem ; Koumanakos, Evangelos ; Bilicka, Katarzyna Anna ; Guceri, Irem
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/271829
• Last update: 10.03.2025, 11:45 AM CET