Does Dividend Tax Impede Competition for Corporate Charters?

Tat-kei Lai, Travis Ng

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

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.
Original languageEnglish
Publication date2014
Number of pages42
Publication statusPublished - 2014
EventThe 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014 - Milan, Italy
Duration: 29 Aug 201431 Aug 2014
Conference number: 41
http://www.earie2014.org/

Conference

ConferenceThe 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014
Number41
CountryItaly
CityMilan
Period29/08/201431/08/2014
Internet address

Cite this

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.
Lai, Tat-kei ; Ng, Travis. / 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.42 p.
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abstract = "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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Lai, T & Ng, T 2014, 'Does Dividend Tax Impede Competition for Corporate Charters?' Paper presented at, Milan, Italy, 29/08/2014 - 31/08/2014, .

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

2014. Paper presented at The 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014, Milan, Italy.

Research output: Contribution to conferencePaperResearchpeer-review

TY - CONF

T1 - Does Dividend Tax Impede Competition for Corporate Charters?

AU - Lai, Tat-kei

AU - Ng, Travis

PY - 2014

Y1 - 2014

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.

KW - Takeover regulations

KW - Corporate law

KW - Tax law

KW - Corporate governance

KW - Agency costs

KW - Dividend taxation

KW - Dividend payment

KW - Investment

M3 - Paper

ER -

Lai T, Ng T. Does Dividend Tax Impede Competition for Corporate Charters?. 2014. Paper presented at The 41st Annual European Association for Research in Industrial Economics Conference. EARIE 2014, Milan, Italy.