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Do dividend taxes affect corporate investment?

  • We test whether dividend taxes affect corporate investments. We exploit Sweden’s 2006 dividend tax cut of 10 percentage points for closely held corporations and five percentage points for widely held corporations. Using rich administrative panel data and tripledifference estimators, we find that this dividend tax cut does not affect aggregate investment but that it affects the allocation of corporate investment. Cash-constrained firms increase investment after the dividend tax cut relative to cash-rich firms. Reallocation is stronger among closely held firms that experience a larger tax cut. This result is explained by higher external equity in cashconstrained firms and by higher dividends in cash-rich firms after the tax cut. The heterogeneous investment responses imply that the dividend tax cut raises efficiency by improving allocation of investment.

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Metadaten
Author:Annette AlstadsaeterORCiD, Martin Jacob, Roni Michaely
URN:urn:nbn:de:hbz:992-opus4-6636
DOI:https://doi.org/10.2139/ssrn.2469680
Series (Serial Number):FAccT Center Working Paper Series (15/2014)
Publisher:WHU - Otto Beisheim School of Management
Place of publication:Vallendar
Document Type:Working Paper
Language:English
Date of Publication (online):2018/06/11
Date of first Publication:0215/01/01
Release Date:2018/06/11
Tag:Dividendenbesteuerung; Kapitalanlage; Privatunternehmen; Schweden
Dividend taxation; Investment; Private firms; Sweden
Page Number:38
Institutes:WHU Centers / WHU Financial Accounting & Tax Center (FAccT Center)
JEL-Classification:G Financial Economics / G3 Corporate Finance and Governance / G30 General
G Financial Economics / G3 Corporate Finance and Governance / G31 Capital Budgeting; Fixed Investment and Inventory Studies
H Public Economics / H2 Taxation, Subsidies, and Revenue / H25 Business Taxes and Subsidies
Licence (German):Copyright for this publication