Changes in taxation of corporate dividends offer excellent opportunities to study dividend clientele effects. We explore payout policies and ownership structures around a major tax reform that took place in Finland in 2004. Consistent with dividend clienteles affecting firms' dividend policy decisions, we find that Finnish firms altered their dividend policies based on the changed tax incentives of their largest shareholders. While firms adjust their payout policies, our results also indicate that ownership structures of Finnish firms also changed around the 2004 reform, consistent with shareholder clienteles adjusting to the new tax system.

The relationship is analysed between conditional stock market volatility and macroeconomic volatility using monthly data for Finland from 1920 to 1991. Conditional monthly volatility is measured as simple weighted moving averages, and also obtained from GARCH estimations. The results are surprisingly strong as compared to those on US data. Significant results are obtained from stock market volatility as a predictor for macroeconomic volatility, as well as the converse. Tests of the joint and simultaneous explanatory power of the macroeconomic volatilities indicate that between one-sixth to above two-thirds of the changes in aggregate stock volatility might be related to macroeconomic volatility. Some evidence of a negative relationship between stock market volatility and trading volume growth was also detected. This result could either be interpreted as an effect of idiosyncratic demand shifts cancelling out as the thickness of the market is increasing, or as a sign of volume growth being some proxy for the level of economic activity.

Using survey data for 157 Nordic firms, we study the determinants for the choice of capital budgeting methods and the setting of hurdle rates (WACCs) in five Nordic countries. We combine survey data with a rich set of determinants, including ownership data, CFO characteristics, as well as financial data (firm characteristics). We find that the use of the NPV method as a primary method, and the sophistication of the capital budgeting, is related both to firm characteristics, variables proxying for real option features in investments, as well as to CFO characteristics (age and education). We also find support for a significant positive hurdle rate premium (i.e. a hurdle rate higher than motivated by economic theory). The premium is weakly related to managerial short-term pressure, and strongly negatively to the sophistication level of the firm's capital budgeting. This relationship goes in line with the predictions from real options and agency theory, since explanations from both categories combine the use of higher hurdle rates with a higher use of multiple methods and "rules of thumb".

"We study the determinants of share repurchases and dividends in Finland. We find that higher foreign ownership serves as a determinant of share repurchases and suggest that this is explained by the different tax treatment of foreign and domestic investors. Further, we also find support for the signalling and agency cost hypotheses for cash distributions. The fact that 41% of the option programmes in our sample are dividend protected allows us to test more directly the 'substitution/managerial wealth' hypothesis for the choice of distribution method. When options are dividend protected, the relationship between dividend distributions and the scope of the options programme turns to a significantly positive one instead of the negative one documented in US data". Copyright Blackwell Publishers Ltd, 2006.

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