Abstract

http://ssrn.com/abstract=2320816
 


 



Pricing Firms’ Responsiveness to Shareholder Tax Incentives


Paul Hribar


University of Iowa - Henry B. Tippie College of Business

Steven Savoy


University of Iowa - Department of Accounting

Ryan J. Wilson


University of Oregon - Lundquist College of Business

October 31, 2014


Abstract:     
We use the anticipated expiration of the Bush tax cuts at the end of 2010 and 2012 to test whether investors value firms’ responsiveness to shareholder tax incentives. This setting provides a shock to the demand for dividends where the signaling implications of dividend announcements are substantially mitigated or absent. We examine the announcement of dividend accelerations and special dividends in November and December of 2010 and 2012, and find evidence that the price reaction is significantly larger than can be explained by tax savings alone. Our evidence is consistent with investors placing a premium on firms that respond to a heightened demand for dividends induced by a tax rate change, consistent with the notion that firms rationally cater to the demand for dividends.

Number of Pages in PDF File: 45

Keywords: special dividend, catering, taxation, signaling

JEL Classification: G35, G38, H2

working papers series





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Date posted: September 6, 2013 ; Last revised: November 1, 2014

Suggested Citation

Hribar, Paul and Savoy, Steven and Wilson, Ryan J., Pricing Firms’ Responsiveness to Shareholder Tax Incentives (October 31, 2014). Available at SSRN: http://ssrn.com/abstract=2320816 or http://dx.doi.org/10.2139/ssrn.2320816

Contact Information

Paul Hribar (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
Dept. of Accounting
Iowa City, IA 52242-1000
United States
319-335-1008 (Phone)
Steven Savoy
University of Iowa - Department of Accounting ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
Ryan J. Wilson
University of Oregon - Lundquist College of Business ( email )
1280 University of Oregon
Eugene, OR 97403
United States
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