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THE DIVIDEND PAYOUTS OF PRIVATE FIRMS: EVIDENCE FROM TAX COURT DECISIONS
Author(s) -
Rao Ramesh K. S.,
White Susan A.
Publication year - 1994
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1994.tb00158.x
Subject(s) - dividend , agency cost , earnings , business , agency (philosophy) , dividend policy , dividend tax , monetary economics , private information retrieval , finance , economics , tax reform , state income tax , public economics , corporate governance , gross income , philosophy , statistics , mathematics , epistemology , shareholder
To study the dividend payouts of private firms we extend the agency cost/external financing cost trade‐off model of dividend payouts to include the accumulated earnings tax (AET). The firm's optimal dividend policy trades off the benefits from lower agency costs against external financing costs and the AET. Information from tax court records reveals that private firms' payouts are influenced by both agency costs and the AET.