How do dividend taxes affect stock volatility? In this paper, I use a decrease in dividend taxes as a natural experiment to identify their impact on firm's price volatility. If a risk-averse executive faces price risk through his incentive contract, changes in stock volatility due to dividend...

Dividends are a key mechanism for shareholders to discipline managers and mitigate agency conflicts. This study examines whether the volatility of tax payments is associated with dividend payouts. Consistent with the predictions, results suggest that firms with more volatile tax payments are...