NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Institutional Tax Clienteles and Payout Policy

Mihir A. Desai, Li Jin

NBER Working Paper No. 13283
Issued in July 2007
NBER Program(s):   AP   CF   PE

This paper employs heterogeneity in institutional shareholder tax characteristics to identify the relationship between firm payout policy and tax incentives. Analysis of a panel of firms matched with the tax characteristics of the clients of their institutional shareholders indicates that "dividend-averse" institutions are significantly less likely to hold shares in firms with larger dividend payouts. This relationship between the tax preferences of institutional shareholders and firm payout policy could reflect dividend-averse institutions gravitating to low dividend paying firms or managers adapting their payout policies to the interests of their institutional shareholders. Evidence is provided that both effects are operative. Instrumental variables analysis indicates that plausibly exogenous changes in payout policy result in shifting institutional ownership patterns. Similarly, exogenous changes in the tax code indicate that as the tax cost of paying dividends changes, managers alter their dividend policy to serve their institutional shareholders.

download in pdf format
   (216 K)

email paper

This paper is available as PDF (216 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13283

Published: Desai, Mihir, and Li Jin. "Institutional Tax Clienteles and Payout Policy." Journal of Financial Economics 100, no. 1 (April 2011): 68–84.

Users who downloaded this paper also downloaded these:
Brav, Graham, Harvey, and Michaely w9657 Payout Policy in the 21st Century
Poterba w10321 Taxation and Corporate Payout Policy
Becker, Ivkovich, and Weisbenner w15175 Local Dividend Clienteles
DeAngelo, DeAngelo, and Stulz w10599 Dividend Policy, Agency Costs, and Earned Equity
Desai, Foley, and Hines w8698 Dividend Policy inside the Firm
 
Publications
Activities
Meetings
Data
People
About

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

Contact Us