Dividend Taxes and Share Prices: Evidence from Real Estate Investment Trusts


  • William M. Getry,

  • Deen Kemsley,

  • Christopher J. Mayer

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    • * Gentry is from the Graduate School of Business, Columbia University, and the National Bureau of Economic Research; Kemsley is from the Graduate School of Business, Columbia University, and the School of Management, Yale University; and Mayer is from The Wharton School at the University of Pennsylvania. We thank Mary Ellen Carter, Rick Green, David Guenther, Joe Gyourko, Charlie Himmelberg, Laurie Hodrick, Glenn Hubbard, Charles Jones, Doron Nissim, Raghu Rau, Matt Rhodes-Kropf, Lynne Sagalyn, Todd Sinai, Nick Souleles, an anonymous referee, and seminar participants at Columbia Business School, the National Bureau of Economic Research, Stanford University, the University of California at Berkeley, the University of North Carolina Tax Symposium, the WFA meetings, the AFA meetings, the University of Texas Real Estate Conference, and The Wharton School for helpful comments. Geoffrey Jervis provided excellent research assistance. We also express our great appreciation to Jon Fosheim and Green Street Advisors, Inc., for providing data, and to the Columbia Business School Real Estate Program for funding. All remaining errors are our own.


Prior empirical evidence regarding the impact of dividend taxes on firm valuation is mixed. This study avoids some of the complications encountered in previous empirical work by exploiting institutional characteristics of REITs, such as their limited discretion over dividend policy and the relative transparency of REIT assets. We regress the market value of equity on the market value of assets and tax basis, which creates tax deductions that lower future dividend taxes without affecting future pretax cash flow. We find that firm value is positively related to tax basis, suggesting that future dividend taxes are capitalized into share prices.