Pricing Firmss Responsiveness to Shareholder Tax Incentives

What do firms do when dividend tax rates change? An examination of alternative payout responses

“…We also point to a concurrent paper by Hribar, Savoy, and Wilson (2013) that presents evidence consistent with positive shareholder returns upon the announcement of a special dividend at the end of 2012. All of this evidence is consistent with corporations responding to individual-level 9 The press often attributed these payments to managerial opportunism.…”

“…In our setting, we consider negative market returns to these tax-induced dividend announcements as an indication of agency conflict. In a recent working paper, Hribar, Savoy, and Wilson (2013) examine market returns around special dividend announcements for firms making tax-induced special dividend announcements in 2012. They find positive abnormal stock returns in excess of the return that would be generated if investors were only pricing the tax savings.…”