"We analyze the effects of changes in dividend tax policy using a life-cycle model of the firm, in which new firms … first access equity markets, then grow internally, and finally pay dividends when they have reached steady state ….In accordance with the traditional view of dividend taxation, new firms raise less equity and invest less the higher the level of …

Anticipated dividend tax changes, on the other hand, allow firms to engage in inter-temporal tax arbitrage so as to … (accelerate) firms' dividend payments, which leads them to hold higher (lower) cash balances and, for capital constrained firms …In accordance with the traditional view of dividend taxation, new firms raise less equity and invest less the higher …