The Impact of Taxation on Dividends: A Cross-Country Analysis

42 Pages Posted: 17 Feb 2009 Last revised: 24 Jun 2012

See all articles by Mohammed Alzahrani

Mohammed Alzahrani

King Fahd University of Petroleum & Minerals

Meziane Lasfer

Bayes Business School, City, University of London

Date Written: February 15, 2009

Abstract

We analyze dividends tax systems in the world and assess their impact on dividend distributions. Using data from 24 OECD countries, we find that the dividend payout is monotonically distributed across tax regimes as firms in classical tax system countries have significantly lower payouts and speed of adjustment to target dividends than companies in partial or full imputation tax system countries. We also report that the type of dividend tax system affects the size of dividend payout while the tax rate differential between dividends and capital gain affects the propensity to pay and the decision to change dividends. Our results hold when we control for the other fundamental determinants of dividends. Finally, we find that ex-day returns are monotonically distributed across the tax systems, suggesting that the dividend taxation is also compounded into stock prices.

Keywords: Payout Policy, Double Taxation, OECD, Personal Income Tax, Imputation System, Integration System

JEL Classification: G18, G35, H24

Suggested Citation

Alzahrani, Mohammed and Lasfer, Meziane, The Impact of Taxation on Dividends: A Cross-Country Analysis (February 15, 2009). Available at SSRN: https://ssrn.com/abstract=1343826 or http://dx.doi.org/10.2139/ssrn.1343826

Mohammed Alzahrani

King Fahd University of Petroleum & Minerals ( email )

Saudi Arabia
96638601626 (Phone)
96638602585 (Fax)

HOME PAGE: http://faculty.kfupm.edu.sa/FINEC/mfaraj/

Meziane Lasfer (Contact Author)

Bayes Business School, City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZ
Great Britain
+44 20 7040 8634 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://https://www.bayes.city.ac.uk/faculties-and-research/experts/meziane-lasfer

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