Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/187558
Authors: 
Wang, Chun Fei
Guo, Yunnan
Year of Publication: 
2011
Citation: 
[Journal:] China Journal of Accounting Research [ISSN:] 1755-3091 [Volume:] 4 [Year:] 2011 [Issue:] 4 [Pages:] 197-209
Abstract: 
Dividend taxation is an important component of investors' taxes and has attracted the attention of policymakers and financial economists. However, the theory of dividends and the reform of dividend taxation remain a puzzle. This paper analyzes the effect of dividend taxation on firms' dividend policies. Using a natural experiment and difference-in-difference estimation, we find that China's dividend tax cut in 2005 led firms to increase their dividend payments. Companies with higher proportions of tradable individual shares or investment fund shares were more likely to increase their dividend payments. However, opportunistic behavior also exists, where companies with higher proportions of shares held by executives were also more likely to increase their dividend payments. These findings support the existence of a causal relationship between China's tax cut and firms' increased dividend payments and imply that the reform of dividend taxation in 2005 achieved its goal.
Subjects: 
Dividend taxation
Dividend policy
Natural experiment
JEL: 
G32
G34
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/
Document Type: 
Article

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