New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor

Posted: 26 Apr 2002

See all articles by Tim Jenkinson

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Leonie Bell

University of Oxford - Department of Economics

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Abstract

This paper examines the impact of a major change in dividend taxation introduced in the U.K. in July 1997. The reform was structured in such a way that the immediate impact fell almost entirely on the largest investor class in the U.K., namely pension funds. We find significant changes in the valuation of dividend income after the reform, in particular for high-yielding companies. These results provide strong support for the hypothesis that taxation affects the valuation of companies, and that pension funds were the effective marginal investors for high-yielding companies.

Keywords: Dividend taxes, investor clienteles, marginal investors

JEL Classification: G12, G35

Suggested Citation

Jenkinson, Tim and Bell, Leonie, New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor. Journal of Finance, Vol. 57, No. 3, pp. 1321-1346, June 2002. Available at SSRN: https://ssrn.com/abstract=304921

Tim Jenkinson (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Leonie Bell

University of Oxford - Department of Economics ( email )

Manor Road
Oxford OX1 3UL
United Kingdom

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