Dividend Tax Reforms and the Cost of Equity Capital: Evidence from Quasi-Natural Experiments in China

International Journal of Economics and Management Studies

© 2020 by SSRG - IJEMS Journal

Volume 7 Issue 7

Year of Publication : 2020

Authors : Guiping Li, Wei Liu

10.14445/23939125/IJEMS-V7I7P119

How to Cite?

Guiping Li, Wei Liu, "Dividend Tax Reforms and the Cost of Equity Capital: Evidence from Quasi-Natural Experiments in China," SSRG International Journal of Economics and Management Studies, vol. 7,  no. 7, pp. 142-152, 2020. Crossref, https://doi.org/10.14445/23939125/IJEMS-V7I7P119

Abstract:

Based on the natural experiment of dividend tax adjustment of China in 2015, the paper studies the impact and its mechanism of dividend tax adjustment on equity capital cost with the data of Shanghai and Shenzhen A-share listed companies in 2014-2016 by establishing moderated mediator models. Empirical results show that dividend tax adjustment reduces the cost of equity capital of listed companies and that financial leverage, dividend distribution, and risk-taking play moderating intermediary effects, while financing constraints only play a moderating effect in the influence of dividend tax adjustment on the cost of equity capital. These conclusions evaluate the economic effect of dividend tax adjustment in China from a micro perspective and provide theoretical reference and inspiration for the companies to control costs and for the government to optimize the taxation system.

Keywords:

Dividend Tax Adjustment, Cost of Equity Capital, Mediating effect, Moderating effect.

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