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Taxes, earnings payout, and payout channel choice
Renneboog,Luc Geiler,Philipp
Renneboog,Luc
Geiler,Philipp
Abstract
We study the tax regulations in relation to dividends and capital gains over the last two decades for the UK in order to determine whether changes in tax regimes affect corporate payout policy (dividends, share repurchases, or a combination). While we can identify investors’ tax-driven preferences for a specific payout channel, we find no evidence of tax-induced clienteles. Firms do indeed not cater to the tax preferences of their shareholders (including individuals, pension funds, corporations). Other factors, such as equity-based compensation received by the CEO and investor sentiment in the form of optimism reduce the dividend payout and increase the use of share repurchases.
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Date
2015-07
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Keywords
Payout policy, Dividends, Share repurchases, Taxation, Regulation, G28 - Government Policy and Regulation, G30 - General, G35 - Payout Policy, G38 - Government Policy and Regulation
Citation
Renneboog, L & Geiler, P 2015, 'Taxes, earnings payout, and payout channel choice', Journal of International Financial Markets Institutions & Money, vol. 37, pp. 178-203. https://doi.org/10.1016/j.intfin.2015.01.005