Corporate Investment and Dividend Decisions under Differential Personal Taxation

B-Tier
Journal: Journal of Financial and Quantitative Analysis
Year: 1988
Volume: 23
Issue: 4
Pages: 369-385

Authors (2)

Masulis, Ronald W. (UNSW Sydney) Trueman, Brett (not in RePEc)

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

This paper explores implications of differential personal taxation for corporate investment and dividend decisions. The personal tax advantage of dividend deferral causes shareholders to generally prefer greater investment in real assets under internal as opposed to external financing. Furthermore, dividend deferral is shown to be costly at the corporate level, causing shareholders in different tax brackets at times to disagree over optimal investment and dividend policies under internal financing. The profitability of internally-financed security investment is shown to depend on a security's tax status and shareholders' tax brackets. However, externally-financed security purchases are unprofitable from a tax standpoint.

Technical Details

RePEc Handle
repec:cup:jfinqa:v:23:y:1988:i:04:p:369-385_01
Journal Field
Finance
Author Count
2
Added to Database
2026-01-25