Resumen de Dividend taxes and payout policy: Evidence from Korea’s 2015–2017 dividend tax cut
The Korean government temporarily lowered dividend tax rates for investors of firms that significantly increased dividend payments in 2015–2017. We examine how the dividend tax cut affects corporate payout policies. We found substantial dividend payment growth in the qualifying firms, mainly funded by operating cash flow; neither cash holding nor share repurchase is significantly reduced. The insider ownership is found to be an important factor in driving a continual enjoyment of the dividend tax cut. Yet, a large proportion of firms only temporarily enjoy the dividend tax cut in 2015, which argues against slow adjustments in dividend payout policy.
