Title: The effect of personal taxes on common stock prices: the case of Belgian tax reform
Authors: Vanthienen, Lambert ×
Vermaelen, T #
Issue Date: 1987
Series Title: Journal of Banking and Finance vol:11 issue:2 (June) pages:223-244
Abstract: The passage of tax reforms in 1982 and 1983 in Belgium provides the opportunity for analysis of the effect of personal taxes on the pricing of common stock. The 1982 tax reform created different tax treatment of dividends for 'old' versus 'new' common shares. The 1983 tax reform abolished this differential. Thus, it is possible to observe directly the relevance of personal taxes for security pricing. A stock pricing sample is developed and evaluated for a period prior to announcement of the 1983 tax reform until the end of November 1983. The evidence indicates that stock prices reflect their relative personal tax advantage and that there is a significant relationship between price differentials and dividend yield. The results also are consistent with the hypothesis that investors who could not avoid costlessly the personal tax on dividend income were willing to pay large premiums to avoid this tax
ISSN: 0378-4266
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center Finance, Leuven
× corresponding author
# (joint) last author

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