Tax Costs And Corporation Dividend Policy: Evidence from the 1986 U.S. Tax reform acts
Sell()les and Wolfson (1992) predict that following the 1986 Tax Reform Act, the tax cost of the corporate form relative 10 that of the partnership PM, (the incremental tax cost) increased significantly. This study hypothesizes that since dividends represent a tax disadvantaged form of income relati...
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| Format: | Article NonPeerReviewed |
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[Yogyakarta] : Universitas Gadjah Mada
2003
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| Online Access: | https://repository.ugm.ac.id/25501/ http://i-lib.ugm.ac.id/jurnal/download.php?dataId=8496 |
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| Institution: | Universitas Gadjah Mada |
| Summary: | Sell()les and Wolfson (1992) predict that following the 1986 Tax Reform Act, the tax cost of the corporate form relative 10 that of the partnership PM, (the incremental tax cost) increased significantly. This study hypothesizes that since dividends represent a tax disadvantaged form of income relative to capital gains, then in response to an increase in incremental tax costs, corporations would decrease their dividend payout ratios. The response is expected to he stronger for corporations owned by shareholders with long investment horizons because the tax cost savedfmin decreasing dividend payout ratios is an increasing function of shareholders' investment horizon. The empirical tests support the hypothesis and. show a negative relationship between the change in incremental tax costs and the change in dividend payout ratios � for films with long average investment horizons.
Keywords: dividend policy: organizational Wm: tax cost: tax reform act |
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