@article{49c9c906f6344caba17746be87f87fb6,
title = "Dividend Taxes and the Allocation of Capital†",
abstract = "This paper investigates the 2013 threefold increase in the French dividend tax rate. Using administrative data covering the universe of firms from 2008 to 2017 and a quasi-experimental setting, we find that firms swiftly cut dividend payments and used this tax-induced increase in liquidity to invest more. Heterogeneity analyses show that firms with high demand and returns on capital responded most while no group of firms cut their investment. Our results reject models in which higher dividend taxes increase the cost of capital and show that the tax-induced increase in liquidity relaxes credit constraints, which can reduce capital misallocation.",
author = "Charles Boissel and Adrien Matray",
note = "Funding Information: *Boissel: No affiliation; Matray: Princeton, NBER, and CEPR (email: amatray@princeton.edu). Liran Einav was the coeditor for this article. This paper was previously circulated under the title: “Higher Dividend Taxes? No Problem! Evidence from France.” We are deeply indebted toward David Thesmar for numerous discussions and support and to Chenzi Xu. We would like to thank four anonymous referees, Antoine Bozio, Denis Gromb, Ulrich Hege, Johan Hombert, Thomas Piketty, James Poterba, Emmanuel Saez, Antoinette Schoar, Stefanie Stantcheva, Danny Yagan, Owen Zidar, Eric Zwick, and various seminar, brown-bag and conference participants at HEC-Paris, Paris School of Economics, EIEF-Einaudi, Toulouse School of Economics, MIT Sloan, Kellogg Northwestern, UCLA Anderson, UCLA Econ, Berkeley, NBER SI Corporate Finance 2019, NBER SI Public Economics 2019, AFA 2020, Wharton, LBS, Imperial, Boston College, Boston University, Oxford Said Business School, TSE, NES Moscow, MIT Sloan, NYU Stern, Rochester Business School. Matray gratefully acknowledges financial support from the Griswold Center for Economic Policy Studies and the Louis A. Simpson Center for the Study of Macroeconomics. Desislava Tartova provided stellar research assistance. †Go to https://doi.org/10.1257/aer.20210369 to visit the article page for additional materials and author disclosure statements. 1Francois Rebsamen, French senator and one of the most prominent figures of the “Parti Socialiste” (the left-wing party in power), 2012. 2The effect for the average firm is a priori unclear. Higher dividend taxes can have either no effect, a positive effect, or a negative effect on investment. We discuss the different theories in the literature review. Publisher Copyright: {\textcopyright} 2022 American Economic Association. All rights reserved.",
year = "2022",
month = sep,
doi = "10.1257/aer.20210369",
language = "English (US)",
volume = "112",
pages = "2884--2920",
journal = "American Economic Review",
issn = "0002-8282",
publisher = "American Economic Association",
number = "9",
}