Is a dividend tax penalty incorporated into the return on a firm's common stock?

Dan S Dhaliwal, Oliver Zhen Li, Robert Trezevant

Research output: Contribution to journalArticle

47 Scopus citations


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.

Original languageEnglish (US)
Pages (from-to)155-178
Number of pages24
JournalJournal of Accounting and Economics
Issue number2
Publication statusPublished - Jun 2003



  • Dividend tax capitalization
  • Expected return on common stock
  • Tax

ASJC Scopus subject areas

  • Accounting
  • Economics and Econometrics
  • Finance

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