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Payout Policy and Tax Deferral

1991; Wiley; Volume: 46; Issue: 1 Linguagem: Inglês

10.2307/2328698

1540-6261

Harry DeAngelo,

Taxation and Legal Issues

The Journal of FinanceVolume 46, Issue 1 p. 357-368 Shorter Paper Payout Policy and Tax Deferral HARRY DeANGELO, HARRY DeANGELOUniversity of Michigan. Special thanks are due L. DeAngelo, J. Long, and R. Stulz for particularly valuable discussions. Helpful comments were also received from A. Auerbach, W. Bailey, J. Brickley, L. Dann, L. Harris, M. Jensen, J. Karpoff, H. Kim, M. Miller, P. O'Brien, J. Poterba, G. Rao, A. Ravid, E. Rice, J. Ritter, A. Shleifer, J. Thomas, R. Walkling, J. Warner, M. Weisbach, J. F. Weston, J. Zimmerman, two anonymous referees, and from finance workshop participants at Michigan, Ohio State, USC, and Wisconsin. Thanks are also due R. Masulis for comments on this paper and because our earlier joint work has materially influenced my thoughts here. Financial support was provided by the J. Ira Harris Center for the Study of Corporate Finance (University of Michigan) and the Managerial Economics Research Center (University of Rochester).Search for more papers by this author HARRY DeANGELO, HARRY DeANGELOUniversity of Michigan. Special thanks are due L. DeAngelo, J. Long, and R. Stulz for particularly valuable discussions. Helpful comments were also received from A. Auerbach, W. Bailey, J. Brickley, L. Dann, L. Harris, M. Jensen, J. Karpoff, H. Kim, M. Miller, P. O'Brien, J. Poterba, G. Rao, A. Ravid, E. Rice, J. Ritter, A. Shleifer, J. Thomas, R. Walkling, J. Warner, M. Weisbach, J. F. Weston, J. Zimmerman, two anonymous referees, and from finance workshop participants at Michigan, Ohio State, USC, and Wisconsin. Thanks are also due R. Masulis for comments on this paper and because our earlier joint work has materially influenced my thoughts here. Financial support was provided by the J. Ira Harris Center for the Study of Corporate Finance (University of Michigan) and the Managerial Economics Research Center (University of Rochester).Search for more papers by this author First published: March 1991 https://doi.org/10.1111/j.1540-6261.1991.tb03754.xCitations: 12 Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat ABSTRACT Equilibrium in the standard finance model implies that value-maximizing firms make taxable equity payouts, even when deferral effectively allows complete tax escape. Since tax deferral and consumption deferral are inherently jointly supplied goods, an excess aggregate supply of future consumption would result if firms followed conventional wisdom and adopted low or zero payout policies to capture tax deferral benefits. The market provides incentives for firms to supply both taxable payouts and capital gains by overriding any tax deferral advantage, just as it provides incentives for equity financing by overriding the corporate tax advantage of debt in "Debt and Taxes." REFERENCES Auerbach, A. 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