Abstract
The agency model of Chetty and Saez (2010) predicts that firms with stronger corporate governance are more responsive to a dividend tax cut in their dividend and investment policies. We test these predictions by exploiting the sudden and significant dividend tax cut following the Jobs and Growth Tax Relief Reconciliation Act of 2003 and the pre-tax cut variation in corporate
governance standards across firms. We find that firms with stronger corporate governance raise dividends and reduce investment in response to the tax cut significantly more than firms with weaker corporate governance. These differential reactions come from differences in corporate governance standards but not differences in ownership concentration ratios.
governance standards across firms. We find that firms with stronger corporate governance raise dividends and reduce investment in response to the tax cut significantly more than firms with weaker corporate governance. These differential reactions come from differences in corporate governance standards but not differences in ownership concentration ratios.
| Original language | English |
|---|---|
| Publication date | 2012 |
| Number of pages | 37 |
| Publication status | Published - 2012 |
| Event | The 24th Annual Conference of the Northern Finance Association. NFA 2012 - Niagara Falls, Ontario, Canada Duration: 28 Oct 2012 → 30 Oct 2012 Conference number: 24 http://northernfinance2012.org |
Conference
| Conference | The 24th Annual Conference of the Northern Finance Association. NFA 2012 |
|---|---|
| Number | 24 |
| Country/Territory | Canada |
| City | Niagara Falls, Ontario |
| Period | 28/10/2012 → 30/10/2012 |
| Internet address |