On the marginal source of investment funds

• 成果类型: Article; Proceedings Paper
• 署名作者: Auerbach, AJ; Hassett, KA
• 署名单位: University of California System; University of California Berkeley; National Bureau of Economic Research; University of California System; University of California Berkeley; American Enterprise Institute for Public Policy Research
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/S0047-2727(01)00172-4
• 发表日期: 2003
• 页码: 205-232
• 关键词: investment funds; marginal source of finance; dividend tax

摘要

Under the 'new view' of dividend taxation developed by Auerbach (Quarterly Journal of Economics 1979;93:433-446), Bradford (Journal of Public Economics 1981;15:1-22) and King (Public Policy and the Corporation, Chapman & Hall, London, 1977), the marginal source of finance for new investment projects is retained earnings. In this case, the tax advantage of retaining earnings precisely offsets the double taxation of subsequent dividends: taxes on dividends have no impact on the investment incentives of firms using retentions as a marginal source of funds and paying dividends with residual cash flows. We show that the same invariance with respect to dividend taxes may hold under weaker conditions with respect to the source of funds, if the use of funds follows the same pattern. We find evidence that there is significant heterogeneity in our sample of US firms, with some firms exhibiting dividend behavior consistent with this expanded version of the new view, and others exhibiting behavior consistent with the traditional view that retained earnings are not an important marginal source of funds. (C) 2003 Elsevier Science B.V. All rights reserved.