NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Executive Financial Incentives and Payout Policy: Firm Responses to the 2003 Dividend Tax Cut

Jeffrey R. Brown, Nellie Liang, Scott Weisbenner

NBER Working Paper No. 11002
Issued in December 2004
NBER Program(s):   PE   CF

We test whether executive stock ownership affects firm payouts using the 2003 dividend tax cut to identify an exogenous change in the after-tax value of dividends. We find that executives with higher stock ownership were more likely to increase dividends after the tax cut in 2003, whereas no relation is found in previous periods when the dividend tax rate was higher. Relative to previous years, firms that initiated dividends in 2003 were more likely to reduce repurchases. The stock price reaction to the tax cut suggests that the substitution of dividends for repurchases may have been anticipated, consistent with agency conflicts.

download in pdf format
   (258 K)

email paper

This paper is available as PDF (258 K) or via email.

This paper was revised on July 17, 2006

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11002

Published: Jeffrey R. Brown & Nellie Liang & Scott Weisbenner, 2007. "Executive Financial Incentives and Payout Policy: Firm Responses to the 2003 Dividend Tax Cut," Journal of Finance, American Finance Association, vol. 62(4), pages 1935-1965, 08. citation courtesy of

Users who downloaded this paper also downloaded these:
Poterba w10321 Taxation and Corporate Payout Policy
Brav, Graham, Harvey, and Michaely w9657 Payout Policy in the 21st Century
Desai, Foley, and Hines w8698 Dividend Policy inside the Firm
Hall and Murphy w9784 The Trouble with Stock Options
Gordon and Dietrich Dietz w12292 Dividends and Taxes
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us