Dividend Taxes and Firm Valuation: A Re-Examination

2001 ◽  
Author(s):  
Michelle Hanlon ◽  
James N. Myers ◽  
Terry J. Shevlin
Keyword(s):  
Firm Valuation ◽  
Dividend Taxes

Capital Gains and Dividend Taxes in Firm Valuation: Evidence of Triple Taxation

2000 ◽  
Vol 75 (4) ◽  
pp. 405-427 ◽  
Author(s):  
Julie H. Collins ◽  
Deen Kemsley
Keyword(s):  
Empirical Analysis ◽  
Firm Valuation ◽  
Capital Gains ◽  
Residual Income ◽  
Equity Valuation ◽  
Valuation Model ◽  
Capital Gains Taxes ◽  
Retained Earnings ◽  
Dividend Taxes

Although firms account for entity-level taxes, they do not account for shareholder-level capital gains and dividend taxes. To account for these proprietary-level taxes, we add them to a residual-income equity valuation model. Empirical analysis supports the model's predictions. First, both capital gains and dividend taxes reduce investors' implicit valuation of the reinvested portion of earnings. Second, dividend taxes reduce the valuation of the portion of earnings distributed as dividends, but capital gains taxes do not. Third, dividend taxes reduce the valuation of retained earnings equity, but again, capital gains taxes do not. These findings suggest that investors implicitly extend entity-level accounting to the proprietary level when they value the firm. The findings also suggest that when fully accounting for the effects of implicit dividend taxes, reinvested earnings appear to be subject to three levels of taxation—corporate, dividend, and capital gains taxes. Paying earnings out as dividends eliminates the capital gains layer of tax and may provide a net wealth benefit for shareholders, rather than a tax penalty as commonly assumed.

scholarly journals Dividend Taxes and Firm Valuation: New Evidence

2006 ◽  
Vol 96 (2) ◽  
pp. 119-123 ◽  
Author(s):  
Alan J Auerbach ◽  
Kevin A Hassett
Keyword(s):  
Firm Valuation ◽  
New Evidence ◽  
Dividend Taxes

Dividend taxes and firm valuation:

2003 ◽  
Vol 35 (2) ◽  
pp. 119-153 ◽  
Author(s):  
Michelle Hanlon ◽  
James N. Myers ◽  
Terry Shevlin
Keyword(s):  
Firm Valuation ◽  
Dividend Taxes

The Effect of Underreaction and Overreaction of Firm Stocks to Firm Valuation: Data from the Indonesian Stock Exchange

2019 ◽  
Author(s):  
Yohanes Indrayono
Keyword(s):  
Behavioral Finance ◽  
Firm Value ◽  
Intangible Assets ◽  
Stock Exchange ◽  
Investor Sentiment ◽  
Firm Valuation ◽  
Good News ◽  
Industrial Sectors ◽  
Tangible Assets ◽  
Firm Profitability

<p>This study contributes to the on-going studies on behavioral finance by providing a case study on underreaction and overreaction of firm stocks to firm valuation. We use the Model of Investor Sentiment (Barberis et al., 2005) to evaluate underreaction and overreaction behavior and reflect on specific findings in the Indonesian market. The result of the study is most of the stocks in the Indonesian Stock Exchange are more overreaction to the news of firm financial statements. Firms on the industry with more intangible assets measure more overreaction than firms on industries with more tangible assets. For stocks with overreaction, the stock firm value is positively affected by a change in the total assets and profitability, but not by change of book value. The result concretized no evidence that firm stocks overreacted to the news more than underreacting. In stock industrial sectors, the financial institutions and wholesale industry stocks demonstrated remarkable overreactions. Nonetheless, automotive, building construction, food and beverage as well as cement evidenced more underreaction. For better return in financial markets, investors may buy stocks of the firm on industry with more tangible assets when there is no good news about the increasing firm profitability and sales; nonetheless, they should buy stocks of the firm on industry with more intangible assets when there is no lousy news about the increasing firm profitability and sales. </p>

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