Ayers, Benjamin C.
[VerfasserIn]
;
Cloyd, C. Bryan
[Sonstige Person, Familie und Körperschaft];
Robinson, John R.
[Sonstige Person, Familie und Körperschaft]
Capitalization of Shareholder Taxes in Stock Prices
: Evidence from the Revenue Reconciliation Act of 1993
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 20, 2000 erstellt
Beschreibung:
We investigate the capitalization of shareholder-level taxes into stock values and provide evidence that capitalization of dividend taxes is influenced both by dividend policy and institutional ownership. We regress weekly abnormal stock returns surrounding the passage of the Revenue Reconciliation Act of 1993 on firm dividend yield, institutional ownership, and control variables. We document a negative stock price reaction conditioned on dividend yield during the two weeks in August, 1993, that Congress passed and President Clinton signed legislation that increased individual income tax rates. In addition, we find that the level of institutional holdings, which proxies for whether the marginal investor in a particular stock is an individual taxpayer, moderates this negative stock price reaction. These findings demonstrate that dividend tax capitalization depends upon both the expected dividend policy of the firm and the tax status of the marginal investor