Journal ArticleDOI
The Canadian Tax Reform and Its Effect on Stock Prices: A Note
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In this paper, the effect of the differential taxation of dividends and capital gains on stock prices was analyzed by analyzing stock price changes around the 1971 Canadian Tax Reform and its subsequent amendments in 1977.Abstract:
THE EFFECT OF personal taxation on stock prices remains controversial. While some researchers have found evidence of a tax effect in the stock market, others have found evidence to the contrary.' This paper provides additional empirical evidence on the effect of the differential taxation of dividends and capital gains on stock prices by analyzing stock price changes around the 1971 Canadian Tax Reform and its subsequent amendments in 1977. The results show that changes in the taxation of cash dividends and capital gains affected high-yield and lowyield stocks listed on the Toronto Stock Exchange (TSE) differently. Section I of the paper describes the tax changes. The method used to analyze the tax effect is described in Section II. Section III reports the results, and conclusions are presented in Section IV.read more
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ReportDOI
The Economic Effects of Dividend Taxation
TL;DR: In this article, the authors compare three different views of how dividend taxes affect decisions by firms and their shareholders, and find that the traditional view that dividend taxes constitute a double-tax on corporate capital income is most consistent with empirical evidence.
Posted Content
New Evidence that Taxes Affect the Valuation of Dividends
TL;DR: This article examined the effects of taxes on investors' relative valuation of dividends and capital gains and found that taxes are important determinants of security market equilibrium, and deepen the puzzle of why firms pay dividends.
Journal ArticleDOI
New Evidence That Taxes Affect the Valuation of Dividends
TL;DR: In this paper, the authors examined the effects of taxes on investors' relative valuation of dividends and capital gains and found that taxes are important determinants of security market equilibrium and deepen the puzzle of why firms pay dividends.
Journal ArticleDOI
Dividend policy theories and their empirical tests
TL;DR: In this article, the authors determine if the method of analysis employed, sample period, and/or data frequency are responsible for the inconsistent support of the corporate dividend model, and conclude that no dividend model is supported invariably.
Journal ArticleDOI
Capital Gains and Dividend Taxes in Firm Valuation: Evidence of Triple Taxation
Julie H. Collins,Deen Kemsley +1 more
TL;DR: In this paper, a residual-income equity valuation model was proposed to account for shareholders' level taxes, including capital gains and dividend taxes, by adding them to a residual income valuation model, which showed that investors implicitly extend entity-level accounting to the proprietary level when they value the firm.
References
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Journal ArticleDOI
The Adjustment of Stock Prices to New Information
TL;DR: In this paper, the authors examine the process by which common stock prices adjust to the information (if any) that is implicit in a stock split and show that the independence of successive price changes is consistent with a market that adjusts rapidly to new information.
Journal ArticleDOI
The effect of personal taxes and dividends on capital asset prices
TL;DR: In this article, the authors derived an after tax version of the Capital Asset Pricing Model, which accounts for a progressive tax scheme and for wealth and income related constraints on borrowing, and showed that before-tax expected rates of return are linearly related to systematic risk and to dividend yield.
Journal ArticleDOI
The effects of dividend yield and dividend policy on common stock prices and returns
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this article, the authors argue that the best method for testing the effects of dividend policy on stock prices is to test the effect of dividend yield on stock returns, and they argue that it is not possible to demonstrate, using the best available empirical methods, that the expected returns on high-yield common stocks differ from the expected return on low-yielding common stocks either before or after taxes.
Journal ArticleDOI
Marginal Stockholder Tax Rates and the Clientele Effect
Edwin J. Elton,Martin J. Gruber +1 more
TL;DR: In this paper, the authors present and test a method of determining marginal stockholder tax brackets and explore the implications of their findings for corporate investment policy, corporate dividend policy, and the assumption of market rationality.
Journal ArticleDOI
Dividends and taxes
TL;DR: In this article, the authors present sufficient conditions for taxable investors to be indifferent to dividends despite tax differentials in favor of capital gains (Strong Invariance Proposition) despite the fact that the personal income tax is approaching a consumption tax.