THE RELATIONSHIP BETWEEN STOCK OWNERSHIP AND THE EFFECT OF INVESTOR TAX STATUS ON DIVIDEND TAX CAPITALIZATION: THEORY AND EMPIRICAL EVIDENCE

Nan-Ting Kuo ； Cheng-Few Lee ； Fu-Lai Lin

《Advances in Quantitative Analysis of Finance and Accounting》 18期 (2021/12) Pp. 61-96

https://doi.org/10.6293/AQAFA.202112_(18).0003

摘要

This paper aims to extend the theoretical work of Guenther and Sansing (2010) and explain why stock ownership can proxy for the effect of investor tax status on dividend tax capitalization. We conduct a theoretical analysis that shows taxable stock ownership can represent the effect of investor tax status on tax parameter. This suggests that Guenther and Sansing's model is only applicable to tax-exempt stock ownership, but not to taxable stock ownership. In 1997, Taiwan conducted a tax reform and implemented an integrated tax system (ITS), which reduced the dividend tax rate of domestic institutional investors from 5% to 0%. By using this set of unique data, we perform empirical studies. Our finding suggests that stock ownership can proxy for the effect of investor tax status on dividend tax capitalization and is compatible with the after-tax capital asset pricing model (CAPM) and does not rely on the concept of marginal investor.

關鍵字

Stock Ownership ； Shareholder Tax Status ； Dividend Tax Capitalization

參考文獻

Amihud, Y. (2002). Illiquidity and stock returns: Cross-section and time-series effects. Journal of Financial Markets, 5, 31-56. doi:10.1016/S1386-4181(01)00024-6.

Amiram, D., & Frank, M. M. (2016). Foreign portfolio investment and shareholder dividend taxes. The Accounting Review, 91, 717-740. doi:10.2308/accr-51264.

Ayers, B. C., Cloyd, C. B., & Robinson, J. R. (2002). The effect of shareholder-level dividend taxes on stock prices: Evidence from the revenue reconciliation act of 1993. The Accounting Review, 77, 933-947. doi:10.2308/accr.2002.77.4.933.

Blouin, J. L., Raedy, J. S., & Shackelford, D. A. (2011). Dividends, share repurchases, and tax clienteles: Evidence from the 2003 reductions in shareholder taxes. The Accounting Review, 86, 887-914. doi:10.2308/accr.00000038.

Brennan, M. J. (1970). Taxes, market valuation and corporate financial policy. National Tax Journal, 23, 417-427. doi:10.1086/NTJ41792223.