Did Dividends Increase Immediately After the 2003 Reduction in Tax Rates?

Working Paper No. 10301 The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduces the maximum statutory personal tax rate on dividends from 38.1 percent to 15 percent. This study analyzes dividend declarations in the quarter following passage. Aggregate dividends rose by 9 percent when board...

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Bibliographic Details
Published in:NBER Working Paper Series 2004-02, p.10301
Main Authors: Blouin, Jennifer L, Jana Smith Raedy, Shackelford, Douglas A
Format: Article
Language:English
Subjects:
Boards of directors
Capital structure
Corporate governance
Dividend policy
Economic policy
Economic theory
Legislation
Organizational structure
Presidents
Reconciliation
Relief provisions
Stockholders
Tax rates
Tax reform
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Summary:Working Paper No. 10301 The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduces the maximum statutory personal tax rate on dividends from 38.1 percent to 15 percent. This study analyzes dividend declarations in the quarter following passage. Aggregate dividends rose by 9 percent when boards of directors first met following enactment. Consistent with the dividend changes being tax-motivated, they are increasing in the percentage of the firm held by individuals. Dividend changes also increased with insider ownership, consistent with managers acting in their own interests. However, these results are limited primarily to firms that made large, special dividends. We find little evidence of an increase in regular, quarterly dividend payments.
ISSN:0898-2937
DOI:10.3386/w10301