cash to its shareholders that is not taxed as dividends, the other where the shareholders are allowed a tax-free return of …

”, that is, the extent to which cash paid to the shareholders must be taxed as dividends. Our analysis shows that Sinn’s (1991 … misleading comparison across two different regimes for the equity trap. Contrary to Sinn, we find that when dividends are paid … following a new issue, as assumed by King-Fullerton, the cost of capital is higher than is the case when no dividends are paid. …