Is the Average Dividend Tax Penalty of Investors Capitalized into Expected Returns?

Persistent Link:
http://hdl.handle.net/10150/306917
Title:
Is the Average Dividend Tax Penalty of Investors Capitalized into Expected Returns?
Author:
Kenchington, David Graham
Issue Date:
2013
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
Capital asset pricing models predict the tax penalty capitalized into expected returns reflects the average tax rate of all investors in a market (average rate theory). To test this theory, I argue stock markets in developed European countries and the U.S. form an integrated market, where the tax capitalized reflects the average rate of investors across these countries. If this is the case, when the U.S. dividend tax rate was cut by 60 percent in 2003, the average rate theory predicts a decrease in the tax capitalized in European stocks. In contrast, firms in less integrated European countries should react significantly less to the U.S. tax cut. Finally, I test a prediction from Desai and Dharmapala (2011) that because of market integration the magnitude of the reaction to the tax cut should be the same for firms in the U.S. and developed European countries. The results in this paper support these predictions.
Type:
text; Electronic Dissertation
Keywords:
Dividend tax capitalization; Europe; Tax; Management; Cost of capital
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Graduate College; Management
Degree Grantor:
University of Arizona
Advisor:
Dhaliwal, Dan S.

Full metadata record

DC FieldValue Language
dc.language.isoen_USen_US
dc.titleIs the Average Dividend Tax Penalty of Investors Capitalized into Expected Returns?en_US
dc.creatorKenchington, David Grahamen_US
dc.contributor.authorKenchington, David Grahamen_US
dc.date.issued2013-
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractCapital asset pricing models predict the tax penalty capitalized into expected returns reflects the average tax rate of all investors in a market (average rate theory). To test this theory, I argue stock markets in developed European countries and the U.S. form an integrated market, where the tax capitalized reflects the average rate of investors across these countries. If this is the case, when the U.S. dividend tax rate was cut by 60 percent in 2003, the average rate theory predicts a decrease in the tax capitalized in European stocks. In contrast, firms in less integrated European countries should react significantly less to the U.S. tax cut. Finally, I test a prediction from Desai and Dharmapala (2011) that because of market integration the magnitude of the reaction to the tax cut should be the same for firms in the U.S. and developed European countries. The results in this paper support these predictions.en_US
dc.typetexten_US
dc.typeElectronic Dissertationen_US
dc.subjectDividend tax capitalizationen_US
dc.subjectEuropeen_US
dc.subjectTaxen_US
dc.subjectManagementen_US
dc.subjectCost of capitalen_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.disciplineManagementen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.advisorDhaliwal, Dan S.en_US
dc.contributor.committeememberDhaliwal, Dan S.en_US
dc.contributor.committeememberLamoureux, Christopheren_US
dc.contributor.committeememberCook, Kirstenen_US
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