Inter-Corporate Ownership, Taxes, and Corporate Payout Choices Between Dividends and Share Repurchases

This paper examines whether corporate payout policies are associated with inter-corporate ownership. Using the System for Electronic Document Analysis and Retrieval (SEDAR) and the Inter-Corporate Ownership (ICO) from Statistics Canada databases, we find that inter-corporate ownership is positively associated with a firm’s propensity to pay dividends and is negatively associated with a firm’s propensity to repurchase shares. Our findings are robust to the endogeneity of inter-corporate ownership and the inclusion of various control variables, such as firm size, liquidity, growth, and profitability. Overall, our results suggest that corporate shareholders’ tax positions affect firms’ payout decisions.