Payout Policy, Taxes, and Corporate Insiders: Evidence from the German Tax Reform 2001

Zeitschrift für Betriebswirtschaft, Forthcoming

34 Pages Posted: 3 Apr 2011 Last revised: 29 Nov 2011

See all articles by Christoph Kaserer

Christoph Kaserer

Technische Universität München (TUM)

Marc Steffen Rapp

University of Marburg - School of Business & Economics; University of Marburg - Marburg Centre for Institutional Economics (MACIE)

Oliver Trinchera

Technische Universität München

Date Written: November 28, 2011

Abstract

Based on a large panel data set of listed German firms we analyze the corporate payout behavior around the German Tax Reduction Act 2001 (GTRA). The GTRA considerably changed the tax preference of shareholders and consequently affected the attractiveness of different forms of payout. Using the tax reform as an exogenous source of variation we examine whether payout decisions are driven by corporate insiders or by influential shareholders. We find that the tax reform reduced both the propensity to pay out dividends as well as their size. However, we find that in those firms where management board members hold substantial stakes, dividend payout behavior has not changed in the aftermath of the GTRA enactment. This effect does not depend on the existence of other influential shareholders, as for instance institutional shareholders. Hence, we conclude that the dividend policy is strongly driven by corporate insiders.

Keywords: corporate governance, clientele effect, dividend policy, ownership structure, payout policy, share repurchases, taxes, tax reform

JEL Classification: G32, G35, G38

Suggested Citation

Kaserer, Christoph and Rapp, Marc Steffen and Trinchera, Oliver, Payout Policy, Taxes, and Corporate Insiders: Evidence from the German Tax Reform 2001 (November 28, 2011). Zeitschrift für Betriebswirtschaft, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1801286

Christoph Kaserer (Contact Author)

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25489 (Phone)
+49 89 289 25488 (Fax)

HOME PAGE: http://www.cefs.de

Marc Steffen Rapp

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

University of Marburg - Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

Oliver Trinchera

Technische Universität München ( email )

Arcisstrasse 21
Munich, 80333
Germany
+49 89 289 25489 (Phone)
+49 89 289 25488 (Fax)

HOME PAGE: http://www.cefs.de

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