Higher Dividend Taxes, No Problem! Evidence from Taxing Entrepreneurs in France

88 Pages Posted: 11 Jul 2019 Last revised: 2 Aug 2021

See all articles by Charles Boissel

Charles Boissel

affiliation not provided to SSRN

Adrien Matray

Princeton University

Date Written: June 10, 2021

Abstract

This paper investigates the 2013 three-fold increase in the French dividend tax rate. Using administrative data covering the universe of firms from 2008-2017 and a quasi-experimental setting, we find that firms swiftly cut dividend payments and used this tax-induced increase in liquidity to invest more. Heterogeneity analyses show that firms with high demand and returns on capital responded most while no group of firms cut their investment. Our results reject models in which higher dividend taxes increase the cost of capital and show that the tax-induced increase in liquidity relaxes credit constraints, which can reduce capital misallocation.

Suggested Citation

Boissel, Charles and Matray, Adrien, Higher Dividend Taxes, No Problem! Evidence from Taxing Entrepreneurs in France (June 10, 2021). Proceedings of Paris December 2020 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3418014 or http://dx.doi.org/10.2139/ssrn.3418014

Charles Boissel

affiliation not provided to SSRN

Adrien Matray (Contact Author)

Princeton University ( email )

Bendheim Center for Finance
26 Prospect Avenue
Princeton, NJ 08540
United States

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