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.
|Number of pages||42|
|Publication status||Published - 2014|
|Event||The 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014 - Milan, Italy|
Duration: 29 Aug 2014 → 31 Aug 2014
Conference number: 41
|Conference||The 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014|
|Period||29/08/2014 → 31/08/2014|
Lai, T., & Ng, T. (2014). Does Dividend Tax Impede Competition for Corporate Charters?. Paper presented at The 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014, Milan, Italy.