Does Dividend Tax Impede Competition for Corporate Charters?

Tat-kei Lai, Travis Ng

Publikation: Bidrag til konferencePaperForskningpeer review

Resumé

High dividend income tax in the U.S. can impede state competition in the market for corporate charters. We offer a model to formalize the mechanism through which dividend tax lowers the incentives for a state legislator to refrain from enacting takeover regulations. We test a key driver within the model, that dividend tax exacerbates agency conflicts between management and shareholders, making takeover regulations less consequential to the corporations that have their shareholders subject to the tax. The implication, that under a dividend tax cut, firms governed by fewer anti-takeover provisions would react more by increasing dividends and reducing overall investment, is borne out in the data.
High dividend income tax in the U.S. can impede state competition in the market for corporate charters. We offer a model to formalize the mechanism through which dividend tax lowers the incentives for a state legislator to refrain from enacting takeover regulations. We test a key driver within the model, that dividend tax exacerbates agency conflicts between management and shareholders, making takeover regulations less consequential to the corporations that have their shareholders subject to the tax. The implication, that under a dividend tax cut, firms governed by fewer anti-takeover provisions would react more by increasing dividends and reducing overall investment, is borne out in the data.

Konference

KonferenceThe 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014
Nummer41
LandItalien
ByMilan
Periode29/08/201431/08/2014
Internetadresse

Emneord

  • Takeover regulations
  • Corporate law
  • Tax law
  • Corporate governance
  • Agency costs
  • Dividend taxation
  • Dividend payment
  • Investment

Citer dette

Lai, T., & Ng, T. (2014). Does Dividend Tax Impede Competition for Corporate Charters?. Afhandling præsenteret på The 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014, Milan, Italien.
Lai, Tat-kei ; Ng, Travis. / Does Dividend Tax Impede Competition for Corporate Charters?. Afhandling præsenteret på The 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014, Milan, Italien.42 s.
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Lai, T & Ng, T 2014, 'Does Dividend Tax Impede Competition for Corporate Charters?' Paper fremlagt ved The 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014, Milan, Italien, 29/08/2014 - 31/08/2014, .

Does Dividend Tax Impede Competition for Corporate Charters? / Lai, Tat-kei; Ng, Travis.

2014. Afhandling præsenteret på The 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014, Milan, Italien.

Publikation: Bidrag til konferencePaperForskningpeer review

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AU - Lai,Tat-kei

AU - Ng,Travis

PY - 2014

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N2 - High dividend income tax in the U.S. can impede state competition in the market for corporate charters. We offer a model to formalize the mechanism through which dividend tax lowers the incentives for a state legislator to refrain from enacting takeover regulations. We test a key driver within the model, that dividend tax exacerbates agency conflicts between management and shareholders, making takeover regulations less consequential to the corporations that have their shareholders subject to the tax. The implication, that under a dividend tax cut, firms governed by fewer anti-takeover provisions would react more by increasing dividends and reducing overall investment, is borne out in the data.

AB - High dividend income tax in the U.S. can impede state competition in the market for corporate charters. We offer a model to formalize the mechanism through which dividend tax lowers the incentives for a state legislator to refrain from enacting takeover regulations. We test a key driver within the model, that dividend tax exacerbates agency conflicts between management and shareholders, making takeover regulations less consequential to the corporations that have their shareholders subject to the tax. The implication, that under a dividend tax cut, firms governed by fewer anti-takeover provisions would react more by increasing dividends and reducing overall investment, is borne out in the data.

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KW - Corporate law

KW - Tax law

KW - Corporate governance

KW - Agency costs

KW - Dividend taxation

KW - Dividend payment

KW - Investment

M3 - Paper

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Lai T, Ng T. Does Dividend Tax Impede Competition for Corporate Charters?. 2014. Afhandling præsenteret på The 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014, Milan, Italien.