Tax differential view

Tax differential view (of dividend policy)

The view that shareholders prefer capital gains over <>, and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.

Tax Differential View of Dividend Policy

A theory stating that investors prefer capital gains to dividends because capital gains are usually taxed at a lower rate. A company whose management subscribes to this theory may concentrate on increasing its share price and is likely to have a low target payout ratio.
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