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NBER Working Papers and Publications
|December 1999||The Share Price Effects of Dividend Taxes and Tax Imputation Credits|
with , 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 1995||Accounting Standards, Information Flow, and Firm Investment Behavior|
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|
in Taxing Multinational Corporations, Martin Feldstein, James R. Hines Jr., R. Glenn Hubbard, editors
|March 1994||Accounting Standards, Information Flow, and Firm Investment Behavior|
with , : 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.
Published: The Effects of Taxation on Multinational Corporations, eds. M. Feldstein, J. Hines, R.G. Hubbard, University of Chicago Press, 1995.