Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271829 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 10185
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We analyze the short and long-run performance of firms that were differentially affected by a new tax on dividends in the lead-up to the Global Financial Crisis. We use exogenous policy variation for firms with different legal statuses and financial year-end dates to causally identify the policy impact. Consistent with intertemporal tax arbitrage, immediately-affected firms significantly reduce payouts. At a time of severe liquidity shortage, the average firm uses the undistributed cash to pay back debt. In the long run, the allocation of undistributed cash to investment, retained earnings, and debt repayment predicts growth and the likelihood of bankruptcy.
Subjects: 
dividend tax
firm survival
investment
intertemporal tax arbitrage
JEL: 
H32
H25
G32
G11
Document Type: 
Working Paper
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