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Tax Uncertainty and Dividend Payouts

Amberger, Harald (2017) Tax Uncertainty and Dividend Payouts. WU International Taxation Research Paper Series, 2017-04. WU Vienna University of Economics and Business, Universität Wien, Vienna.

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Abstract

I examine whether and to what extent tax uncertainty affects a firm's dividend payouts. Based on the argument that tax uncertainty impairs the persistence and predictability of after-tax cash flows, I hypothesize and find that firms with greater tax uncertainty exhibit a lower probability of dividend payouts. The effect of tax uncertainty is stronger in the presence of financial constraints and weaker for firms that distribute dividends to alleviate agency conflicts. Furthermore, I find a negative effect of tax uncertainty on dividend levels, which is moderated by the costs of dividend reductions. These results are economically meaningful as a one standard deviation higher tax uncertainty leads to a 9.9 percentage point lower probability and a $23.6 million reduction in dividend payouts. Taken together, my findings document a real effect of tax avoidance and contribute to the understanding of interactions between uncertain tax avoidance and a firm's financial ecosystem.

Item Type: Paper
Additional Information: This is a draft version; please do not cite or circulate without the permission of the author. Editors: Eva Eberhartinger, Michael Lang, Rupert Sausgruber and Martin Zagler (Vienna University of Economics and Business), and Erich Kirchler (University of Vienna)
Keywords: Tax Uncertainty, Tax Avoidance, Dividend Payouts, Real Effects, Share Repurchases
Classification Codes: JEL G30, G35, H25, H26, H32
Depositing User: ePub Administrator
Date Deposited: 05 Apr 2017 16:54
Last Modified: 05 Apr 2017 16:54
URI: http://epub.wu.ac.at/id/eprint/5511

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