tailieunhanh - Effects of the 2003 Dividend Tax Cut: Evidence from Real Estate Investment Trusts

Social capital refers to relationships of trust and mutuality that can be mobilized to achieve instrumental ends. Social capital is the relationship glue through which individuals, families and social networks navigate economic opportunity, social conflict and various institutions. While social capital is not just built through place-based networks, locality plays a role, particularly in many economically disadvantaged areas. Scholars such as Robert Putnam view social capital not simply as a by-product of prosperity but a potential precursor to prosperity; the quality and depth of formal and informal relationships can have a wealth building impact. Social capital for Putnam includes bonding. | Finance and Economics Discussion Series Divisions of Research Statistics and Monetary Affairs Federal Reserve Board Washington . Effects of the 2003 Dividend Tax Cut Evidence from Real Estate Investment Trusts Jesse Edgerton 2010-34 NOTE Staff working papers in the Finance and Economics Discussion Series FEDS are preliminary materials circulated to stimulate discussion and critical comment. The analysis and conclusions set forth are those of the authors and do not indicate concurrence by other members of the research staff or the Board of Governors. References in publications to the Finance and Economics Discussion Series other than acknowledgement should be cleared with the author s to protect the tentative character of these papers. Effects of the 2003 Dividend Tax Cut Evidence from Real Estate Investment Trusts Jesse Edgerton Federal Reserve Board April 23 2010 Abstract Recent literature has estimated that the 2003 dividend tax cut caused a large increase in aggregate dividend payouts which would imply that dividend taxation creates large efficiency costs relative to the amount of revenue raised. I document that dividend payouts by real estate investment trusts also rose sharply following the tax cut even though REIT dividends did not qualify for the cut. Using REITs as a control group in a simple difference-in-differences framework produces small and statistically insignificant estimates of the effect of the tax cut on aggregate dividend payouts. I further document that the ratio of dividend payouts to corporate earnings changed little after the tax cut and that the ratio of dividend payouts to share repurchases fell dramatically. These facts suggest that contemporaneous increases in earnings and investor demand for payouts drove the observed increases in aggregate dividend payouts with at most a modest role for the tax cut. JEL Codes H24 G35. Keywords Payout policy dividends share repurchases taxes. Email . Any views expressed here .