Dividend Taxes and Firm Valuation: A Re-Examination

Posted: 29 Jan 2003

See all articles by Michelle Hanlon

Michelle Hanlon

Massachusetts Institute of Technology (MIT) - Sloan School of Management

James N. Myers

University of Tennessee, Knoxville - College of Business Administration

Terry J. Shevlin

University of California-Irvine

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Abstract

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

Hanlon, Michelle and Myers, James N. and Shevlin, Terry J., Dividend Taxes and Firm Valuation: A Re-Examination. Journal of Accounting and Economics, Vol. 35, No. 2, April 2003. Available at SSRN: https://ssrn.com/abstract=374964

Michelle Hanlon

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-668
Cambridge, MA 02142
United States
617-253-9849 (Phone)

James N. Myers

University of Tennessee, Knoxville - College of Business Administration ( email )

Haslam Business Building
Knoxville, TN
United States

Terry J. Shevlin (Contact Author)

University of California-Irvine ( email )

Irvine, CA California 92697-3125
United States
2065509891 (Phone)

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