We find that a firm's dividend yield has a positive impact on its common stock return that is decreasing in the level of institutional and corporate ownership, our indicator of whether the marginal investor in a firm's common stock is more likely to be a low-tax or a high-tax investor. These results suggest that (1) a dividend tax penalty is incorporated into the return on a firm's common stock and (2) both a firm's dividend policy and its ownership structure impact the size of the dividend tax penalty.
- Dividend tax capitalization
- Expected return on common stock
ASJC Scopus subject areas
- Economics and Econometrics