Taxes, Earnings Payout, and Payout Channel Choice

58 Pages Posted: 17 Jun 2014

See all articles by Philipp Geiler

Philipp Geiler

EMLYON Business School

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

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Date Written: June 1, 2014


We study the tax regulations in relation to dividends and capital gains over the last two decades for the UK in order to determine whether changes in tax regimes affect corporate payout policy (dividends, share repurchases, or a combination). While we can identify investors’ tax-driven preferences for a specific payout channel, we find no evidence of tax-induced clienteles. Firms do indeed not cater to the tax preferences of their shareholders (including individuals, pension funds, corporations). Other factors, such as equity-based compensation received by the CEO and investor sentiment in the form of optimism reduce the dividend payout and increase the use of share repurchases.

Keywords: payout policy, dividends, share repurchases, taxation, regulation

JEL Classification: G28, G30, G35, G38

Suggested Citation

Geiler, Philipp and Renneboog, Luc, Taxes, Earnings Payout, and Payout Channel Choice (June 1, 2014). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 426/2014, Available at SSRN: or

Philipp Geiler

EMLYON Business School ( email )

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Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

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European Corporate Governance Institute (ECGI)

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Tilburg Law and Economics Center (TILEC)

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Tilburg, 5000 LE

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