We estimate firms' implied cost of capital and examine the effects of dividend taxes on this ex ante measure. The results support the dividend tax capitalization hypothesis. We find a positive relation between implied cost of equity capital and dividend yield that is decreasing in aggregate...

The American Jobs Creation Act of 2004 created a tax holiday allowing firms to repatriate foreign earnings at a reduced tax rate and a domestic production activities deduction (DPAD) to encourage domestic investment. We investigate whether the DPAD affects firms' decisions to use repatriated...

United States multinational corporations can delay financial statement recognition of U.S. taxes on repatriations by designating foreign subsidiary earnings as quot;permanently reinvestedquot; under APB Opinion No. 23. This paper examines 1) whether firms use the permanently reinvested earnings...

Two separate streams of research find evidence that firms decrease Ramp;D spending to meet earnings benchmarks and that the Ramp;D tax credit increases Ramp;D spending. However, these studies do not consider stock option exercises by Ramp;D employees which likely influence Ramp;D spending...

We estimate firm level implied cost of equity capital based on recent advances in accounting and finance research and examine the effect of dividend taxes on the cost of equity capital. We investigate whether dividend taxes affect firms' cost of capital by testing the relation between the...

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (the 2003 Tax Act) drastically reduced shareholder level taxes on equity income. If shareholder level taxation is an important component of cost of equity capital, then cost of equity should decrease after the 2003 Tax Act. Using the...

The American Jobs Creation Act of 2004 (the Act) creates a temporary tax holiday that effectively reduces the U.S. tax rate on repatriations from foreign subsidiaries from 35 percent to 5.25 percent. Firms receive the reduced tax rate by electing to take an 85 percent dividends received...

The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced shareholder level taxes on equity income. If shareholder level taxation is a component of cost of equity capital, then the cost of equity capital should decrease after the Tax Act. We find that the cost of equity capital decreases...