Sep 21, 2010

Articles in journals

Borges, R.

1

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The differential taxation of dividends and capital gains may generate tax-induced clienteles. If economic agents have different fiscal framings, this implies that some investors may prefer dividends, while others may prefer capital gains. The purpose of this study is to analyze, for the Portuguese market in 1990-1999, if the tax regime influences the choice of stocks by investors, i.e., if the different fiscal treatment of dividends and capital gains generates preferences for stocks of higher or smaller dividend yields. Our empirical study is based on the Elton e Gruber (1970) approach. We find that the price reduction is lower than the dividend amount, which is consistent with the unfavorable taxation of dividends. However, we do not find evidence of tax-induced clienteles in Portuguese stocks, linked either to dividend yields or payout ratios.

Tax-clienteles,Tax regime,Dividends,