This paper investigates tax reasons for cross-sectional deviations from the general consensus in literature that a firm's cash flow has a positive effect on dividend payout. We use a large multinational panel data set to show that the positive cash flow sensitivity of dividends is decreasing in...

We compile a comprehensive international dividend and capital gains tax data set to study tax-based explanations of corporate payout for a panel of 6,035 firms from 25 countries for the period 1990-2008. We find robust evidence that the tax penalty on dividends versus capital gains corresponds...