The efficiency costs of dividend taxation with managerial firms

Marko Koethenbuerger; Michael Stimmelmayr

doi:10.1093/ej/ueab064

The efficiency costs of dividend taxation with managerial firms

Marko Koethenbuerger, Michael Stimmelmayr

ETH Zürich

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1 Citation (SciVal)

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Abstract

The paper provides a positive and efficiency analysis of dividend taxation in a corporate agency model with a costly managerial effort. Unlike existing (agency) models, this model is consistent with empirical work in corporate finance and able to predict empirically observed investment responses to dividend taxation. In addition, we show that investment changes are not sufficient to infer, first, the efficiency cost of dividend taxation and, second, the financing regime underlying firms' investments. We provide a testable implication that allows to empirically uncover the source of investment finance by comparing investment responses to dividend taxes and managerial incentive pay.

Original language	English
Article number	ueab064
Pages (from-to)	1123-1149
Number of pages	27
Journal	Economic Journal
Volume	132
Issue number	643
Early online date	20 Aug 2021
DOIs	https://doi.org/10.1093/ej/ueab064
Publication status	Published - 30 Apr 2022

Funding

Financial support through a grant from the European Policy Research Network (EPRN grant\30570) and the German Science Foundation (DFG STI 619/1-1) is gratefully acknowledged.

Keywords

dividend taxation, quiet-life model, corporate governance, tax on incentive pay, managerial firms

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10.1093/ej/ueab064

The efficiency costs of dividend taxation with managerial firms (accepted author manuscript)
Accepted author manuscript. This is a pre-copyedited, author-produced version of an article accepted for publication in The Economic Journal following peer review. The version of record Marko Koethenbuerger, Michael E Stimmelmayr, The Efficiency Costs of Dividend Taxation with Managerial Firms, The Economic Journal, 2021;, ueab064 is available online at: https://doi.org/10.1093/ej/ueab064
Accepted author manuscript, 426 KB

Cite this

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The efficiency costs of dividend taxation with managerial firms

Abstract

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