Dividend Taxes and the Allocation of Capital

Charles Boissel, Adrien Matray

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


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.

Original languageEnglish (US)
Pages (from-to)2884-2920
Number of pages37
JournalAmerican Economic Review
Issue number9
StatePublished - Sep 2022

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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