A Test of the Theory of Tax Clienteles for Dividend Policies

National Tax Journal, June 1999

Posted: 4 May 1999

See all articles by Dan S. Dhaliwal

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Merle Erickson

University of Chicago - Booth School of Business

Robert Trezevant

University of Southern California - Leventhal School of Accounting

Abstract

The theory of tax clienteles for dividend policies predicts that tax-exempt/tax-deferred and corporate investors will increase their ownership of the equity of firms that initiate a cash dividend as these investors purchase shares of stock that are being sold by individual investors for whom dividends are tax-disadvantaged. We analyze the change in stock ownership for a sample of firms that initiate a cash dividend and find evidence that is consistent with this theory. These results offer convincing new evidence that the effects of tax clienteles for dividend policies are strong enough to influence the decisions of investors.

Note: This is a description of the paper and is not the actual abstract.

JEL Classification: H24, G35

Suggested Citation

Dhaliwal, Dan S. and Erickson, Merle and Trezevant, Robert, A Test of the Theory of Tax Clienteles for Dividend Policies. National Tax Journal, June 1999. Available at SSRN: https://ssrn.com/abstract=159148

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Merle Erickson (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-0716 (Phone)
773-702-0458 (Fax)

Robert Trezevant

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States
213-740-5013 (Phone)
213-747-2815 (Fax)

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