NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Payout Taxes and the Allocation of Investment

Bo Becker, Marcus Jacob, Martin Jacob

NBER Working Paper No. 17481
Issued in October 2011
NBER Program(s):   CF

When corporate payout is taxed, internal equity (retained earnings) is cheaper than external equity (share issues). High taxes will favor firms who can finance internally. If there are no perfect substitutes for equity finance, payout taxes may thus change the investment behavior of firms. Using an international panel with many changes in payout taxes, we show that this prediction holds well. Payout taxes have a large impact on the dynamics of corporate investment and growth. Investment is "locked in" in profitable firms when payout is heavily taxed. Thus, apart from any aggregate effects, payout taxes change the allocation of capital.

download in pdf format
   (395 K)

email paper

A non-technical summary of this paper is available in the February 2012 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper is available as PDF (395 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17481

Published: Becker, Bo & Jacob, Marcus & Jacob, Martin, 2013. "Payout taxes and the allocation of investment," Journal of Financial Economics, Elsevier, vol. 107(1), pages 1-24. citation courtesy of

Users who downloaded this paper also downloaded these:
Dettling and Kearney w17485 House Prices and Birth Rates: The Impact of the Real Estate Market on the Decision to Have a Baby
Arikan and Stulz w17463 Corporate Acquisitions, Diversification, and the Firm's Lifecycle
Schwartz-Ziv and Weisbach w17509 What do Boards Really Do? Evidence from Minutes of Board Meetings
Asker, Farre-Mensa, and Ljungqvist w17394 Comparing the Investment Behavior of Public and Private Firms
Courtemanche, Heutel, and McAlvanah w17483 Impatience, Incentives, and Obesity
 
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