Dividend Taxes and Firm Valuation: A Re-Examination
Posted: 29 Jan 2003
Harris and Kemsley (1999) suggest that shareholder-level dividend taxes on retained earnings are fully impounded into stock prices at the top statutory rate. Harris and Kemsley base their empirical tests on Ohlson (1995) with the addition of dividend taxes. We analyze Harris and Kemsley's extended Ohlson model and evidence. We show that the model, tests, and results in Harris and Kemsley are non-diagnostic regarding dividend tax capitalization.
Keywords: Valuation, dividend taxes, tax capitalization
JEL Classification: G12, G35, H25
Suggested Citation: Suggested Citation