Managerial Response to the May 2003 Dividend Tax Cut |
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| Authors: | Alon Brav John R. Graham Campbell R. Harvey Roni Michaely |
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| Affiliation: | Alon Brav, John R. Graham, and Campbell R. Harvey are Professors of Finance at Duke University in Durham, NC and are research associates of the NBER. Roni Michaely is a Professor of Finance at Cornell University in Ithaca, NY and at IDC in Herzelina, Isreal. |
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| Abstract: | We survey 328 financial executives to determine the effects of the May 2003 dividend tax cut. We find that the tax cut led to initiations and dividend increases at some firms. However, executives say that among the factors that affect dividend policy, the tax rate reduction is less important than the stability of future cash flows, cash holdings, and the historic level of dividends. Tax effects have roughly the same importance as attracting institutional investors and the availability of profitable investments. We also find that press releases only occasionally mention the dividend tax cut as the reason for an initiation. |
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