Page 93 - 臺大管理論叢第32卷第1期

NTU Management Review Vol. 32 No. 1 Apr. 2022

of share capital to substitute dividends after the tax reform. Also, changes in foreign
shareholdings of the affected firms are not significantly different from those of unaffected
firms. However, the affected firms have relatively higher (lower) dividend payouts before
(after) the 2015 tax reform, but the results are only significant for the affected firms with

low foreign shareholdings. Finally, we find that the impacts of the 2015 tax reform on
dividend payout ratios of family firms vary with ownership concentrations of family firms.

4. Originality/Contribution

Our findings extend the scope of prior research on dividend policies of family firms
in response to changes in tax systems. Prior research has given evidence of the differences
in dividend policies between family and non-family firms. However, literature on the

changes in dividend policy after tax reform of family firms and non-family firms is
limited. Our findings extend this line of research by providing evidence on the dividend
policy of family firms and non-family firms during the tax reform of increasing tax. We
provide empirical evidence that family firms are more concerned about non-tax costs than

non-family firms in deciding whether to opportunistically change their dividend payouts
in response to the tax reform under the partial imputation system. Further, we also provide
evidence that non-family firms with highly-taxed individual directors have an incentive to
change corporate dividend policy to reduce their individual investors’ tax burden under the

2015 tax reform.

5. Research Implications

Our findings have implications for family firms in delineating optimal dividend
policies in response to the tax reform that will increase shareholders’ dividend income
taxes. The majority of family firms’ shareholders are the family members who are heavily
impacted by an increase in dividend income tax. Our results, however, suggest that non-

tax costs such as agency problems may outweigh tax costs of family members in deciding
an optimal dividend payout decision in response to changes in the previous tax system.
In addition, the results of this study show that non-family firms will adapt their dividend
policies according to 2015 tax reform. However, the dividend policies of firms also affect

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