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Examining the Impact of the 1986 Tax Reform Act on Corporate Dividend Policy: A New Methodology
Author(s) -
Casey K. Mike,
Anderson Dwight C.,
Mesak Hani I.,
Dickens Ross N.
Publication year - 1999
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1999.tb00461.x
Subject(s) - dividend , dividend policy , dividend tax , corporate tax , economics , tax policy , tax reform , double taxation , control (management) , empirical research , accounting , financial economics , monetary economics , public economics , tax avoidance , finance , state income tax , management , philosophy , epistemology , gross income
This article introduces a new methodology to investigate the effects of the 1986 Tax Reform Act (TRA) on corporate dividend policy. The methodology employs a modified version of Rozeff's (1982) model to control for the potential effect of underlying influential variables. The empirical results show there is no widespread reaction to the 1986 TRA passage on the aggregate level of dividends and only modest support for an industry‐related dividend effect. We also find that firm size does not play a significant role in dividend policy reaction to the 1986 TRA.