We demonstrate that firms' investment and job creation are influenced by shareholder taxes on capital gains and dividend. More importantly, the relation between shareholder taxes and firms' investment and job creation varies with financial constraint that firms face. Less financially constrained...

The European Union (EU) has no explicit common income tax law. Nevertheless, Court of Justice decisions have driven EU member states to adopt more similar corporate tax systems, and thus, to align the tax treatment of corporate profit distributions - dividends and capital gains. This paper...

For more than 50 years, researchers around the world have tirelessly been searching for a solution to Blacks famous “dividend-puzzle.” However, despite tremendous efforts in different fields of economics, the influence of taxation on the distribution policy of firms has remained elusive and...

We utilise a change to the treatment of franking credits in the hand of domestic shareholders, namely the introduction of fully refundable franking credits, to provide robust evidence on the causal effect of investor-level taxes on corporate dividend policy. Consistent with investors having a...

Tax effects on distribution policy have been at the center of debate in the theoretical and empirical literature for over half a century. Theoretically, there are two major schools of thought on the matter. The “traditional view” predicts an influence of taxation on firms' payouts, while the...

Dividends are taxed at the investor level, but injecting funds into firms does not offer investors the symmetric tax benefit. Hence, there is a tax saving incentive to retain cash in the firm. We theoretically and empirically show that this tax saving motive is important for corporate cash...

Absent theoretical guidance, empiricists have been forced to rely upon numerical comparative statics from constant tax rate models in formulating testable implications of tradeoff theory in the context of natural experiments. We fill the theoretical void by solving in closed-form a dynamic...

Extensive empirical research concerning the impact of taxes on corporate decisions has had trouble identifying seemingly obvious effects. Perhaps the problem is that the seemingly obvious tax predictions are not quite right. We provide an equilibrium model with both corporate and personal taxes....

This paper examines the response of private firms and their shareholders to a dividend tax increase, which affects only a small group of shareholders. Using an exogenous shock in Germany, my results suggest that firms do not adjust their payout policy but corporate minority shareholders, the...

The paper addresses the question whether the preferential treatment of retained earnings according to section 34a EStG is suitable to achieve a comparable tax burden of partnerships and corporations. It can be shown that it is impossible to determine a reference value for all domestic companies....