Using Elton-Gruber Statistics in Estimating Panel Data Dividend Models.

This paper focuses on how tax reforms affect corporate dividend policy at disaggregate level. A panel data partial adjustment model of dividend payment is estimated using Italian data. The sample period (1962-83) includes two important reforms changed the dividend taxation. Tax discrimination variables are calculated for each firm using the Elton-Gruber method based on ex-dividend days variations of share prices. Estimates reveal significant interindividual differences in dividend policy and support the tax clientele hypothesis of dividend decisions. This hypothesis received further support by the estimates of a tax version of a CAPM. Copyright 1990 by Blackwell Publishing Ltd