Ownership Structure, Tax Regime, and Dividend Smoothing: International Evidence
38 Pages Posted: 3 Sep 2012 Last revised: 14 Feb 2014
Date Written: February 14, 2014
We investigate dividend smoothing behaviors of approximately 6,000 firms from 28 countries. The data find a wide variation in the extent of dividend smoothing across countries, while US firms smooth dividends the most. Firms with a concentrated ownership structure adjust their dividends quickly, especially when the target dividend level is lower than dividends of previous years. Companies located in a classical tax system have lower target dividend levels and in turn smooth dividends more than companies in a partial or full imputation system. These results suggest US firms adjust their dividend payments only slowly due to the dispersed ownership structure and tax system.
Keywords: Dividend smoothing, Ownership structure, Tax, International
JEL Classification: G32, G35
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