Institutional Tax Clienteles and Payout Policy

Mihir   Desai; Li  Jin

Article | Journal of Financial Economics | April 2011

Institutional Tax Clienteles and Payout Policy

Abstract

This paper employs heterogeneity in institutional shareholder tax characteristics to identify the relation between firm payout policy and tax incentives. Analysis of a panel of firms matched with the tax characteristics of the clients of their institutional shareholders indicates that "dividend-averse" institutions are significantly less likely to hold shares in firms with larger dividend payouts. This relation between the tax preferences of institutional shareholders and firm payout policy may reflect dividend-averse institutions gravitating towards low dividend paying firms or managers adapting their payout policies to the interests of their institutional shareholders. Evidence is provided that both effects are operative. Plausibly exogenous changes in payout policy result in shifting institutional ownership patterns. Similarly, exogenous changes in the tax cost of institutional investors receiving dividends results in changes in firm dividend policy.

Keywords: Private Equity; Investment; Taxation; Ownership Stake; Business and Shareholder Relations;

Format: Print

17 pages

Find at Harvard Read Now

Citation:

Desai, Mihir, and Li Jin. "Institutional Tax Clienteles and Payout Policy." Journal of Financial Economics 100, no. 1 (April 2011): 68–84.

Case | HBS Case Collection | August 2015 (Revised October 2017)

Turnaround at Norsk Gjenvinning (A)

George Serafeim and Shannon Gombos

Erik Osmundsen, CEO of Norsk Gjenvinning (NG), had initiated a program to strenghten corporate governance, eliminate corruption and improve compliance, and as a result the company had experienced a turnover of almost half of its top 70 line managers and strained relations with several competitors and the waste management industry association. Osmundsen had relentlessly pushed an agenda that involved transforming and professionalizing the waste management industry to mitigate instances of corruption and other crimes. Osmundsen was convinced that his turnaround strategy and change management process would be effective. Having brought employees on board, he was planning to relentlessly engage customers, regulators, and security agencies to drive transformational change within the industry. It was still unclear though how fast customer demand for robust compliance programs would affect the competitive dynamics. How should NG go about convincing its customers? What could NG learn from companies in other industries that have relied on customer support to shift to responsible business practices? Did competitors that maintain non-compliant practices have an Achilles heel that NG could exploit? To what degree should NG drive change on its own in order to achieve customer differentiation vs. collaborate with competitors to bring the whole industry on board? What other mechanisms existed to level the playing field if NG did not succeed in convincing the customers?

Keywords: change leadership; governance; Compliance; waste management; Environmental Impact; social responsibility; industry regulation; regulatory enforcement; Leading Change; Change Management; Crime and Corruption; Governance Compliance; Wastes and Waste Processing;

Citation:

Serafeim, George, and Shannon Gombos. "Turnaround at Norsk Gjenvinning (A)." Harvard Business School Case 116-012, August 2015. (Revised October 2017.) View Details

Cite View Details Educators Purchase

Faculty & Research

Institutional Tax Clienteles and Payout Policy

Abstract

Citation:

About the Author

More from the Author