Dividend Tax Gradation and Corporate Investment Efficiency: Evidence from China
Xinyi Tong
AI summary
75% confidenceThis paper examines the impact of China's Graduated Dividend Tax policy on corporate investment efficiency, finding that it improves efficiency by curbing overinvestment and strengthening corporate governance. The policy achieves this by increasing individual investors' patience and reducing information asymmetry. The effects are more pronounced in highly leveraged firms with frequent shareholder meetings.
Generated by MESSAI extraction pipeline · review against source PDF
No 3D model is mapped to this paper yet. Parameter ranges above still place reported values on the literature distribution.
Abstract
This paper exploits China’s Graduated Dividend Tax (GDT) policy as a quasi-natural experiment and applies a difference-in-differences approach to examine the effect of dividend tax adjustments on firms’ investment efficiency. The results show that the policy improves investment efficiency, mainly by curbing overinvestment. Mechanism analyses indicate that the GDT policy operates by increasing individual investors’ patience and improving corporate governance, including reducing information asymmetry. Heterogeneity analyses further show that the effects are more pronounced for highly leveraged firms with more frequent shareholder meetings. Overall, the results suggest that the GDT policy improves firms’ investment efficiency by strengthening corporate governance and curbing overinvestment. JEL classification numbers: G32, G34, D22. Keywords: GDT policy, Investment efficiency, Long-term shareholding; Corporate governance.
Key findings
- The GDT policy improves investment efficiency by curbing overinvestment
- The policy operates by increasing individual investors' patience
- The policy improves corporate governance, including reducing information asymmetry
Keywords
Identifiers
- Journal
- Journal of Applied Finance & Banking
- Year
- 2026