We study the tax regulations in relation to dividends and capital gains over the last two decades for the UK in order to determine whether changes in tax regimes affect corporate payout policy (dividends, share repurchases, or a combination). While we can identify investors? tax-driven preferences for a specific payout channel, we find no evidence of tax-induced clienteles.
Firms do indeed not cater to the tax preferences of their shareholders(including individuals, pension funds, corporations). Other factors, such as equity-based compensation received by the CEO and investor sentiment in the form of optimism reduce the dividend payout and increase the use of share repurchases.
Contrary to signaling models’ central predictions, changes in the level of cash flows do not empirically follow changes in dividends. We use the Campbell (1991) decomposition to construct cash-flow and discount-rate news from returns and find the...Read more
We argue that CEOs have diﬀerent attitudes toward the ﬁrm’s stakeholders and that these diﬀerences in attitudes aﬀect the ﬁrm’s decision making. We hypothesize that these diﬀerences stem from diﬀerences in political ideology: Liberal CEOs, as...Read more
With the emergence of sovereign wealth funds (SWFs) around the world managing equity of over $8 trillion, their impact on the corporate landscape and social welfare are being scrutinized. This study investigates whether and how SWFs incorporate...Read more