Research Output

Research Output

Individual Investors' Dividend Taxes And Corporate Payout Policies

Kangtao Ye   Professor

Accounting

Research direction:

The Role of Accounting in Firm Value Creation, Labor and Accounting

Lecture course:

Management Accounting, Accounting Research Methodology

Abstract:

The 2012 Dividend Tax Reform in China ties individual investors’ dividend tax rates to the length of their shareholding period. We find that firms facing a reduction (increase) in their individual investors’ dividend tax rates are more (less) likely to increase dividend payout. Such an effect is concentrated in firms where incentives of controlling shareholders and minority shareholders are aligned. Furthermore, investors respond to this tax law change by reducing trading activities before the cum-dividend day and successfully lower their dividend tax penalty. Overall, our evidence enhances the notion that individual investors’ tax profiles shape firms’ payout policies.