The Effect Of Tax Rate Change On Dividend Payout

• DOI: 10.19030/jber.v2i10.2931
• Publication Date: 2016-03-03T16:12:41Z
• Authors: George M. Jabbour; Yikang Liu
• Keywords: Dividend payout ratio; Retained earnings; Tax rate; Investment; Dividend yield

President Bush’s 2003 tax cut has revived the topic of dividend policy. Dividend payout depends on many factors, such as earnings, size, and growth in addition to rate. To study effect a change rates dividends, we need control for other factors that may affect them. Following Fama French (2001) approach, divide our sample firms into three different categories characterized by profitability, investment opportunity, size; estimate averaged forecast errors four groups each category. We find size be most important factor related dividends when taxes are not taken account. In addition, empirical evidence suggests profitability is only included. words, more profitable are, likely they pay higher applicable decline.