NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Trevor Harris

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NBER Working Papers and Publications

December 1999The Share Price Effects of Dividend Taxes and Tax Imputation Credits
with R. Glenn Hubbard, Deen Kemsley: w7445
We examine the hypothesis that dividend taxes are capitalized into share prices by focusing on investors' implicit valuations of retained earnings versus paid-in equity. Retained earnings are distributable as taxable dividends, whereas paid-in equity is distributable as a tax-free return of capital. Consistent with dividend tax capitalization, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. In addition, differences in dividend tax rates across U.S. tax regimes are associated with predictable differences in the magnitude of the implied tax discount for retained earnings, as are differences in dividend tax rates across Australia, Japan, France, Germany, and the United Kingdom.

Published: Harris, Trevor S., R. Glenn Hubbard and Deen Kemsley. "The Share Price Effects Of Dividend Taxes And Tax Imputation Credits," Journal of Public Economics, 2001, v79(3,Mar), 569-596.

January 1995Accounting Standards, Information Flow, and Firm Investment Behavior
with Jason Cummins, Kevin Hassett
in The Effects of Taxation on Multinational Corporations, Martin Feldstein, James R. Hines Jr., R. Glenn Hubbard, editors
International Accounting, Asymmetric Information, and Firm Investment
with Jason Cummins, Kevin Hassett
in Taxing Multinational Corporations, Martin Feldstein, James R. Hines Jr., R. Glenn Hubbard, editors
March 1994Accounting Standards, Information Flow, and Firm Investment Behavior
with Jason G. Cummins, Kevin A. Hassett: w4685
We present a description of two different accounting regimes that govern reporting practice in most developed countries. 'One-book' countries, e.g. Germany, use their tax books as the basis for financial reporting and 'two-book' countries, e.g. the United States, keep the books largely separate. We derive a structural model and formalize a testable implication of our discussion: firms in one-book countries may be reluctant to claim some tax benefits if reductions in taxable income may be misinterpreted by financial market participants as signals of lower profitability. Econometric estimates suggest that accounting regime differences play an important role in describing domestic investment patterns both within and across countries.

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