Acknowledgments: We thank the seminar participants at National Sun Yat-Sen University, the National University of Kaohsiung, and the American Accounting Association annual meeting for their helpful comments. A research grant (NSC98-2410-H-110-025) from National Science Council Taiwan is appreciated. We are grateful to Ted Knoy for his editorial assistance.
Dividend Policy and Elimination of Double Taxation of Dividends*
Article first published online: 17 APR 2011
© 2011 Korean Securities Association
Asia-Pacific Journal of Financial Studies
Special Issue: Special Issue on Studies of Emerging Capital Markets
Volume 40, Issue 2, pages 261–284, April 2011
How to Cite
Kao, L. and Chen, A. (2011), Dividend Policy and Elimination of Double Taxation of Dividends. Asia-Pacific Journal of Financial Studies, 40: 261–284. doi: 10.1111/j.2041-6156.2011.01038.x
- Issue published online: 17 APR 2011
- Article first published online: 17 APR 2011
- Received 31 August 2010; Accepted 31 January 2011
- Capital gain;
- Double taxation;
- Stock repurchase
Taiwan eliminated double taxation of dividends in 1999, and allowed firms to repurchase stocks from July 2000. Taiwanese firms tend to pay dividends as opposed to repurchasing stock, even with zero tax on capital gains, and firms pay larger dividends after the elimination of double taxation of dividends. The relation between dividends and director ownership has been reinforced by the elimination of double taxation of dividends. The relation between dividends and the elimination of double taxation of dividends has also been reinforced by director ownership as stockholders receive more tax credits from dividends following the elimination of double taxation of dividends and directors act to protect stockholders’ interests.