TY  - JOUR
AU  - Brown,Jeffrey R.
AU  - Liang,Nellie
AU  - Weisbenner,Scott
TI  - Executive Financial Incentives and Payout Policy: Firm Responses to the 2003 Dividend Tax Cut
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11002
PY  - 2004
Y2  - December 2004
UR  - http://www.nber.org/papers/w11002
L1  - http://www.nber.org/papers/w11002.pdf
N1  - Author contact info:
Jeffrey Brown
Department of Finance
University of Illinois at Urbana-Champaign
515 East Gregory Drive
Champaign, IL 61820
Tel: 217/333-3322
E-Mail: brownjr@illinois.edu

Nellie Liang
Federal Reserve Board
20th and Constitution Ave NW
Washington, DC 20551
E-Mail: nliang@frb.gov

Scott Weisbenner
University of Illinois at Urbana-Champaign
Department of Finance
340 Wohlers Hall, MC-706
1206 South Sixth Street
Champaign, IL  61820
Tel: 217/333-0872
Fax: 217/244-9867
E-Mail: weisbenn@illinois.edu
AB  - 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.
ER  -