The Effect of Buybacks on Capital Allocation

O, Ricardo De la

doi:10.2139/ssrn.4120735

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Evolution Of Capital Misallocation1

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2022

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“…The payment of dividends can have positive reallocation effects if the money distributed by the firm to its shareholders is then reinvested into firms with higher returns to capital (Gourio and Miao, 2010;De la O, 2020). In this respect, dividend payments can be seen as an efficient way to reallocate resources away from firms with low return to capital (which explains why they are distributing dividends) toward firms with higher return to capital.…”

Section: Evolution Of Capital Misallocationmentioning

confidence: 99%

Dividend Taxes, Firm Growth, and the Allocation of Capital

Boissel¹,

Matray²

2022

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This paper investigates the 2013 three-fold increase in the French dividend tax rate. Using administrative data covering the universe of firms from 2008-2017 and a quasi-experimental setting, we find that firms swiftly cut dividend payments and used this tax-induced increase in liquidity to accumulate more capital and labor, resulting in higher revenues. Heterogeneity analyses show that firms with high demand and returns to capital responded most, while no group of treated firms reduced their capital. Our results reject models in which higher dividend taxes increase the cost of capital and show that the tax-induced increase in liquidity relaxes financial constraints, which can reduce capital misallocation.

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Section: Evolution Of Capital Misallocationmentioning

confidence: 99%

Dividend Taxes, Firm Growth, and the Allocation of Capital

Boissel¹,

Matray²

2022

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show abstract

The Effect of Buybacks on Capital Allocation

Cited by 1 publication

References 39 publications

Dividend Taxes, Firm Growth, and the Allocation of Capital

Dividend Taxes, Firm Growth, and the Allocation of Capital

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