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The Impact of Dividend Tax Cut and Managerial Stock Holdings on Firm's Dividend Policy

26 Pages Posted: 28 May 2004  

Jouahn Nam

Pace University - Lubin School of Business

Jun Wang

City University of New York, CUNY Baruch College - Zicklin School of Business - Department of Economics and Finance

Ge Zhang

University of New Orleans - College of Business Administration - Department of Economics and Finance

Date Written: January 15, 2004

Abstract

This paper examines the effect of managerial stock holdings on corporate dividend payments under the new dividend tax environment. Utilizing a very rare event on dividend tax rate cut introduced in May 2003, this paper allows us to fully investigate whether managers holding sizable stakes direct their corporations to raise dividends for their own benefits. Our results show that managerial stock holdings have significantly positive effect on both the likelihood and the extent of dividend increase in year 2003. However, there is no such relation for the period of 1993 through 2002. Similar to the previous studies, managerial stock options are negatively related to dividend payment increases both before and after dividend tax cut.

Suggested Citation

Nam, Jouahn and Wang, Jun and Zhang, Ge, The Impact of Dividend Tax Cut and Managerial Stock Holdings on Firm's Dividend Policy (January 15, 2004). EFMA 2004 Basel Meetings Paper. Available at SSRN: https://ssrn.com/abstract=492802 or http://dx.doi.org/10.2139/ssrn.492802

Jouahn Nam

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States
212-346-1818 (Phone)
212-346-1573 (Fax)

Jun Wang

City University of New York, CUNY Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

Ge Zhang (Contact Author)

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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