Government 12.16 1.00 0.00 0.00 Financial Institutions 15.44 1.73 0.70 0.24
Corporations 108.54 18.92 41.17 14.56 Mutual Funds 7.05 1.49 0.25 0.07 Foreign Institutions 0.39 0.20 0.00 0.00 Tax-exempt Institutions 56.19 7.41 6.76 2.32
Table 3. Trading before and after Dividends Increases/Decreases by Investor Category This table reports the relative net share purchasing by three types
of investors around announcements of dividend increases and decreases. Shares purchased and sold by each trader are recorded during two event windows, days –30 to -1 and +1 to +30 on either side of a dividend announcement on day zero. If purchases exceed sales, the trader is counted as a net buyer. Then, the fraction of net buyers within each investor category is taken as a percentage relative to the fraction of net buyers over all categories.
Type of traders Before After Difference t-value p-value Dividend Increases: 183 observations
Institutions 0.549 0.581 0.033 0.863 0.389
Wealthy Individuals 62.74 61.41 -1.333 -2.57 0.011 Less-Wealthy Individuals 36.71 38.01 1.301 2.49 0.013
Dividend Decreases: 180 observations
Institutions 0.634 0.628 -0.006 -0.111 0.912
Wealthy Individuals 61.51 62.87 1.361 2.51 0.013
Less-Wealthy Individuals 37.86 36.51 -1.355 -2.46 0.015
Table 4. Dividends and Changes in Ownership Structure
For Taiwan during 1995-1999, changes in dividends are related to changes in the ownership of various investor groups. In Panel A, the independent variable is the announced change (first difference) in cash dividends per share, while the separate dependent variables are first differences (from before the announcement until afterward) in the proportions of shares held by Institutions, Wealthy individuals (who own more than 1000 lots), Medium-Wealth individuals (<100 lots), and Lower-Wealth individuals (<10 lots), respectively. A lot is 1,000 shares. Panel B’s dependent variables are changes in the percentages of shares owned by various types of institutions. The .1, .05, and .01 levels of significance are indicated by *, **, and *** respectively.
Adjusted R-squares are low, only one to two percent, even in significant regressions.
Panel A: Change in Ownership:
Institutions and Individuals
Panel B: Change in Ownership:
Type of Institution Intercept Slope Intercept Slope Institutions 0.594 -0.819 Government 0.073 0.226
t-value 1.44 -0.63 t-value 0.82 0.81 Wealthy Individuals (>1000 lots)
-2.660** -7.136*
Financial
Institutions -0.063 0.181 t-value -2.16 -1.86 t-value -0.66 0.6 Medium-Wealth Individuals (<100 lots) 0.561 2.459** Corporations 0.281 0.210
t-value 1.44 2.03 t-value 0.42 0.1
Lower-Wealth Individuals (<10 lots)1.658***5.044*** Mutual Funds -0.312 -1.190*
t-value 2.73 2.76 t-value -1.46 -1.78 Foreign
Table 5. Dividends and Ownership structure for Taiwan, 1995-1999 inclusive
Using dividends (Panel A) and payout ratios (Panel B), Taiwan companies are classified into non-paying firms, and, among firms paying dividends, those paying less than the median and those paying greater than or equal to the median. The payout ratio is the total dividend divided by net income. The proportion of shares held by each type of investor is tabulated after dividend announcements in each year, then averaged across the five sample years. Investor types include institutions (as a whole and broken down into type), wealthy individuals (who own at least 1000 lots), medium wealth individuals (<100 lots), and lower wealth individuals (<10 lots.) One lot is 1,000 shares. Column five gives an F- test that the same proportions are held in all firms regardless of dividend policy, while column six gives an F-test for the proportions held in non-paying firms and firms whose payouts are greater than the median. The 0.1, 0.05, and 0.01 significance levels are denoted by *, **, and *** respectively. Wealthy Individuals (>1000) 36.12 31.30 30.04 6.15*** 8.58***
Medium-Wealth Individuals (<100) 21.07 18.03 18.66 3.41** 2.90*
Lower-Wealth Individuals (<10) 9.24 8.00 8.36 2.54* 1.85 All Institutions 29.26 38.46 40.92 29.19*** 42.45***
Government 0.85 2.12 0.93 4.20** 0.04
Financial Institutions 1.74 2.38 2.17 2.03 1.45
Corporations 18.40 20.52 24.35 7.44*** 14.40***
Mutual Funds 1.83 1.81 1.12 2.94* 5.68**
Foreign Institutions 0.02 0.16 0.00 3.45* 0.43
Tax-exempt Institutions 6.42 11.47 12.35 22.18*** 32.97***
Table 5. Dividends and Ownership structure for Taiwan, 1995-1999 inclusive, (continued) Panel B
Payout Ratios F-Tests
Zero Below Median
Above Median
All three Groups
Zero vs.
> Median Wealthy Individuals (1000) 36.12 32.03 28.64 7.56*** 13.04***
Lower-Wealth Individuals (10) 9.24 7.38 8.84 3.49* 0.38 Medium-Wealth Individuals (100) 21.07 16.40 20.45 5.73** 0.19*
All Institutions 29.26 40.37 39.40 29.91*** 31.13***
Government 0.85 2.15 0.91 4.42** 0.03
Financial Institutions 1.74 1.87 2.73 3.74** 6.91***
Corporations 18.40 21.46 23.57 6.40*** 10.99***
Mutual Funds 1.83 1.96 0.98 4.50** 8.18***
Foreign Institutions 0.02 0.16 0.00 3.44** 0.42 Tax-exempt Institutions 6.42 12.77 11.20 23.24*** 20.89***
Table 6. Dividends and the Legalization of Stock Repurchases
The table examines firm dividend policies after Taiwan legalized stock repurchases in September, 2000. Firms are classified as non-paying and paying based on actual dividends during 1995-1999, before stock repurchases were allowed. Panels A reports whether dividends were zero or positive during the repurchase period and gives the mean dividend per share. Panel B provides the mean change in dividends per share before and after stock repurchasing was allowed. Some firms that were part of the sample in previous tables were delisted during after 2000.
Panel A. Dividend levels after September 2000 Dividends before Repurchase Period
Panel B. Dividend changes after September 2000
Dividends before Repurchase Period
10 Decrease/NC: dividend decrease or no change
Table 7. Ownership Structure, Prior Dividend Policy, and the Propensity to Repurchase Shares
Share repurchases were allowed in Taiwan beginning in September 2000. This table examines whether the repurchase policies of individual firms depend on their ownership structure. The sample is divided into non-paying and dividend-paying firms for the five years prior to September 2000. A logit model is estimated with dependent variable equal 1.0 or zero depending on whether a firm did or did not engage in at least one share repurchase during 2000 to 2003. The main explanatory variable is a proxy for the tax incidence of firm shareholders. It is the difference of the proportion of shares held by wealthy individual shareholders (those holding at least 1000 lots, 600 lots or 400 lots in three separate logit models) and the proportion held by less wealthy shareholders (holding less than 10 lots in all three reported logits.) Control variables include (1) M/B, the market value of equity on August 31, 2000 divided by the book value of equity; (2) Pre-ret, the six-month holding period return before repurchasing was permitted, and (3) Post-ret, the one-year return after repurchase for repurchasing firms or the one-year return after repurchasing was permitted (September 2000) for non-repurchasing firms. The 0.1, 0.05, and 0.01 significance levels are denoted by *, **, and *** respectively.
(Table continued on next page)
Prior
Dividends N11 Intercept Tax Incidence
Square of Tax
Incidence*100 M/B Pre-ret Post-ret LRT12 Panel A: In tax incidence variable, wealthy individuals hold more than 1000 lots.
Positive 164 0.271 0.0305 -0.083**
-52.78 -1.569 13.31*** 83.27***
11 Number of observations (firms.)
12 Chi-square value in likelihood ratio test of significance for the logit model.
s.e. 0.688 0.0207 0.034 179.6 1.375 2.188
Panel B: In tax incidence variable, wealthy individuals hold more than 600 lots.
Positive 0.081 0.0409* -0.089***
-56.18 -1.647 13.45***
Panel C: In tax incidence variable, wealthy individuals hold more than 400 lots.
Positive -0.005 0.0457** -0.092***
-55.51 -1.633 13.45***
Table 8. Dividend Increases, Share Repurchases, and Tax Incidence
Share repurchases were allowed in Taiwan beginning in September 2000. This table examines whether the repurchase policies of individual firms depend on their ownership structure. A logit model is estimated with dependent variable equal 1.0 if the firm repurchases stock after September 2000 and zero if the firm does not repurchase stock. We divide the sample into three groups based on the change in dividend before and after September 2000: dividend increase, dividend decrease and no change in dividend. The main explanatory variable is a proxy for the tax incidence of firm shareholders. It is the difference of the proportion of shares held by wealthy individual shareholders (those holding at least 1000 lots, 600 lots or 400 lots in three separate logit models) and that of less wealthy shareholders (holding less than 10 lots in all three logits.) Control variables include (1) M/B, the market value of equity on August 31, 2000 divided by the book value of equity; (2) Pre-ret, the six-month holding period return before repurchasing was permitted, and (3) Post-Pre-ret, the one-year return after repurchase for repurchasing firms or the one-year return after repurchasing was permitted (September 2000) for non-repurchasing firms. The 0.1, 0.05, and 0.01 significance levels are denoted by *, **, and *** respectively.
(Table continued on next page)
Table 8. Dividend Increases, Share Repurchases, and Tax Incidence (continued) Dividends N13 Intercept Tax
Incidence
Square of Tax
Incidence*100 M/B Pre-ret Post-ret LRT14 Panel A: In tax incidence variable, wealthy individuals hold more than 1000 lots.
Dividend
13 Number of observations (firms.)
14 Chi-square value in likelihood ratio test of significance for the logit model.
Decrease
Panel B: In tax incidence variable, wealthy individuals hold more than 600 lots.
Dividend
Panel C: In tax incidence variable, wealthy individuals hold more than 400 lots.
Dividend
Increase -0.072 0.046* -0.061*
-76.87 -0.872 8.233***
s.e.
130
0.578 0.024 0.033 124.1 1.244 1.826
35.93***
1.099 0.031 0.062 266.6 2.078 2.645
40.19***
1.022 0.037 0.052 218.5 1.429 1.593
29.21***
Appendix
In the appendix, we calculate the effective tax rate for each household and get the numbers and holding shares of households in six tax brackets(>=30%, <30% and >=21%, <21% and >=13%, <13% and >=6%,
<6% and >0%, 0%). The data are from the data center, and sample period covers from 1998-1999.
Wealthy and Unwealthy are defined as follows:
1. Wealthy Households I (effective tax rate >= 30%) 2. Wealthy Households II (effective tax rate >= 21%) 3. Medium-Wealth Households II (effective tax rate < 13%) 4. Medium-Wealth Households I (effective tax rate < 6%) 5. Lower-Wealth Households (effective tax rate=0%)
Table 1 presents summary stat6istics about the owners of stocks in Taiwan stock exchange. We measure the number of households and the shares owned by various classifications of wealthy/ unwealthy households.
The results of Table1 show that wealthy households I (tax rate >=30%) contribute to only 0.6% (0.48%) of number of firm＇s outstanding on average. However, in terms of shares, wealthy households (tax rate >=30%) own 64.86% (24.54%) of the total outstanding shares. In contrast, lower wealth households (tax rate =0%) own less than 7% of total outstanding shares.
Table 2 replicates the Table 4 in the main context, in that we de-trend the ownership and add firm size as a Control in the independent variable. The finding of this table is basically similar, yet weaker, to what we have found in Table 2, in the main context.
Table 1 Ownership structure: household-based
Means Medians
Number % Number %
Wealthy Households I (effective tax rate >= 30%) 96 0.60 45 0.48
Wealthy Households II (effective tax rate >= 21%) 384 2.07 171 1.79 Medium-Wealth Households II (effective tax rate < 13%) 19778 91.05 8853 91.58 Medium-Wealth Households I (effective tax rate < 6%) 11173 51.50 5002 51.76 Lower-Wealth Households (effective tax rate=0%) 3400 15.53 1553 15.76
Shares
(Million) % Lots %
Wealthy Households I (effective tax rate >= 30%) 64.86 19.31 24.54 12.91 Wealthy Households II (effective tax rate >= 21%) 91.50 29.37 42.68 24.60 Medium-Wealth Households II (effective tax rate < 13%) 394.68 54.61 86.53 56.70 Medium-Wealth Households I (effective tax rate < 6%) 255.86 25.18 38.79 24.93 Lower-Wealth Households (effective tax rate=0%) 64.55 7.55 11.78 7.31
Table 2 Dividends and Changes in ownership Structure: De-trend and size control
Panel A: Change in Ownership: Institutions and Individuals
Intercept Slope Size
Institutions 0.191 ** -0.048 -0.091
Wealthy Individuals (>1000 Lots) 0.026 -0.118 -0.196
Medium-Wealth Individuals (<100 Lots) -0.026 0.210 * 0.154 Lower-Wealth Individuals (<10 Lots) 0.009 0.293 ** 0.156
Panel B: Change in Ownership: Type of Institution
Intercept Slope Size
Government -0.267 -0.141 0.271
Financial Institutions -0.468 -0.534 1.650
Corporations 0.266 0.266 * -0.250 *
Mutual Funds -0.546 0.211 0.431
Foreign Institutions -1.359 *** 0.234 0.203
Tax-exempt Institutions -0.459 ** 0.179 0.617 **