Abstract

https://ssrn.com/abstract=962143
 
 

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Corporate Investment and Dividend Decisions Under Differential Personal Taxation


Brett Trueman


University of California, Los Angeles (UCLA) - Anderson School of Management

Ronald W. Masulis


University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)


Journal of Financial and Quantitative Analysis, Vol. 23, No. 4, 1998

Abstract:     
This paper explores implications of differential personal taxation for corporate investment and dividend decisions. The personal tax advantage of dividend deferral causes shareholders to generally prefer greater investment in real assets under internal as opposed to external financing. Furthermore, dividend deferral is shown to be costly at the corporate level, causing shareholders in different tax brackets at times to disagree over optimal investment and dividend policies under internal financing. The profitability of internally-financed security investment is shown to depend on a security's tax status and shareholders' tax brackets. However, externally-financed security purchases are unprofitable from a tax standpoint.

Number of Pages in PDF File: 22

Keywords: Dividends, Investment, Personal Taxation, Corporate Taxation, Internal Financing, External Financing, Tax Brackets, Taxes, Shareholder Conflicts of Interest

JEL Classification: D23, G31, G35, H23, H24, H25


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Date posted: February 12, 2007  

Suggested Citation

Trueman, Brett and Masulis, Ronald W., Corporate Investment and Dividend Decisions Under Differential Personal Taxation. Journal of Financial and Quantitative Analysis, Vol. 23, No. 4, 1998. Available at SSRN: https://ssrn.com/abstract=962143

Contact Information

Brett Trueman
University of California, Los Angeles (UCLA) - Anderson School of Management ( email )
110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
310-825-4720 (Phone)
310-267-2193 (Fax)
Ronald W. Masulis (Contact Author)
University of New South Wales - Australian School of Business ( email )
Sydney, NSW 2052
Australia
612-9385-5860 (Phone)
612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )
BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore
Feedback to SSRN


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