Are Shareholder Dividend Taxes on Corporate Retained Earnings Impounded in Equity Prices?: Additional Evidence and Analysis

Posted: 29 Jan 2003

See all articles by Dan S. Dhaliwal

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Merle Erickson

University of Chicago - Booth School of Business

Mary Margaret Frank

University of Virginia - Darden School of Business

Monica Banyi

Gonzaga University

Multiple version iconThere are 2 versions of this paper

Abstract

The purpose of this paper is to evaluate the model used by Harris and Kemsley (1999), Harris, Hubbard and Kemsley (2001) and Collins and Kemsley (2000), hereafter CHHK, and to investigate their empirical results. We demonstrate that the model underlying CHHK is flawed, and show that their interpretation of the data is incorrect. Finally, we find that after controlling for market to book ratio, Harris and Kemsley's first main result vanishes. In total, we reject CHHK's conclusions that equity prices are discounted for shareholder dividend taxes on retained earnings.

Keywords: taxes, dividends, tax capitalization

JEL Classification: G12, H24, G35

Suggested Citation

Dhaliwal, Dan S. and Erickson, Merle and Frank, Mary Margaret and Banyi, Monica L., Are Shareholder Dividend Taxes on Corporate Retained Earnings Impounded in Equity Prices?: Additional Evidence and Analysis. Journal of Accounting and Economics, Vol. 35, No. 2, April 2003. Available at SSRN: https://ssrn.com/abstract=374963

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Merle Erickson (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-0716 (Phone)
773-702-0458 (Fax)

Mary Margaret Frank

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4432 (Phone)
434-243-5021 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/frank.htm

Monica L. Banyi

Gonzaga University ( email )

United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,979
PlumX Metrics