Discussion of “Executive stock-based compensation and firms’ cash payout: the role of shareholders’ tax-related payout preferences”

Review of Accounting Studies · 2008 · Volume 13 · Issue 2

Abstract

Aboody and Kasznik (Rev Acc Stud, this issue, 2008) develop and test cross-sectional predictions about how firms might respond to the 2003 dividend tax cuts. My discussion suggests some alternative firm responses, a restructuring of the main tests to be consistent with the theory and predictions, and an interpretation of the magnitude of the observed associations. Overall, the paper addresses an interesting issue, recognizes that executive compensation is endogenous in this event, and adds to the long literature on dividend payout policy.

Keywords

Dividend taxation, Capital gains taxation, Executive compensation, Cash payouts

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