Dividend taxation and corporate investment: A comparative study between the classical system and imputation system of dividend taxation in the United States and Australia

Stewart, M, Brooks, R and Jugurnath, B 2008, 'Dividend taxation and corporate investment: A comparative study between the classical system and imputation system of dividend taxation in the United States and Australia', Review of Quantitative Finance and Accounting, vol. 31, no. 2, pp. 209-224.


Document type: Journal Article
Collection: Journal Articles

Title Dividend taxation and corporate investment: A comparative study between the classical system and imputation system of dividend taxation in the United States and Australia
Author(s) Stewart, M
Brooks, R
Jugurnath, B
Year 2008
Journal name Review of Quantitative Finance and Accounting
Volume number 31
Issue number 2
Start page 209
End page 224
Total pages 16
Publisher Springer
Abstract In recent times a number of countries have initiated some important tax reforms to eliminate the distortions of double taxation. In this context, Australia adopted a dividend imputation system in 1987, while the US employed the 1986 Tax Reform Act (TRA). The analysis in this paper examines the effects on the level of corporate capital investment, on proxies for corporate tax rates, financial leverage, liquidity, capital intensity and firm size after controlling for the tax reforms. The empirical results provide evidence that: (1) dividend imputation as introduced in Australia is an effective way to reduce the distortions caused by the traditional system of taxation. (2) Compared with the TRA, dividend imputation has been better able to positively stimulate corporate capital investment. (3) TRA effect on corporate investment is more pronounced in the US for firms having a net operating loss. (4) Individual tax rates play a role in corporate investment decisions in both the US and Australia.
Subject Applied Mathematics not elsewhere classified
Keyword(s) Corporate investment
Dividend imputation & Tax Reform Act
DOI - identifier 10.1007/s11156-007-0073-4
Copyright notice © 2007 Springer Science+Business Media, LLC.
ISSN 0924-865X
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