Inter-Corporate Ownership, Taxes, and Corporate Payout Choices Between Dividends and Share Repurchases

Abstract:     
This paper examines whether corporate payout policies are associated with inter-corporate ownership. Using the System for Electronic Document Analysis and Retrieval (SEDAR) and the Inter-Corporate Ownership (ICO) from Statistics Canada databases, we find that inter-corporate ownership is positively associated with a firm’s propensity to pay dividends and is negatively associated with a firm’s propensity to repurchase shares. Our findings are robust to the endogeneity of inter-corporate ownership and the inclusion of various control variables, such as firm size, liquidity, growth, and profitability. Overall, our results suggest that corporate shareholders’ tax positions affect firms’ payout decisions.

Number of Pages in PDF File: 27

Keywords: Dividend Payout, Share Repurchase, Inter-Corporate Ownership, Size, Growth, Profitability, Liquidity

JEL Classification: G35, M41

working papers series