The Corporate Effects of Personal Taxation
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| Title | The Corporate Effects of Personal Taxation |
| Authors | |
| Abstract | Under fairly general conditions it is shown that changes in personal tax rates on dividend and capital gains income will change a firm’s share price, cost of equity capital and the shape of its cost of equity capital function. A personal tax rate change will also affect a firm’s optimal capital structure and its WACC. In 2003, the personal tax rates of dividend and capital gains income were lowered for many tax payers. The model presented here predicts that the effects of the 2003 tax cuts should include a rise share prices, an increase in the amount of equity capital in firm’s capital structures and a significant increase in the number of firms increasing or initiating dividend payments. Various empirical analyses cited in this study show that all of these things did occur. |
| Publisher | International Journal of Business and Social Research |
| Date | 2013-07-03 |
| Source | 2164-2540 |
| Rights | This is an open access journal which means that all content is freely available without charge to the user or his/her institution. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the articles in this journal without asking prior permission from the publisher or the author. |