Discussion paper

DP6005 Direct Evidence of Dividend Tax Clienteles

We study a large data set of stock portfolios held by individuals and organizations in the Swedish stock market. The dividend yields on these portfolios are systematically related to investors' relative tax preferences for dividends versus capital gains. Tax-neutral investors earn 40 basis points higher dividend yield on their portfolios than investors which face higher effective taxation of dividends than capital gains. We conclude that there are dividend tax clienteles in the market. We also argue that the abundant portfolio holdings by closely-held corporations, despite triple taxation at a combined marginal tax rate as high as 77.5%, is a consequence of taxation.


Rydqvist, K, M Dahlquist and G Robertsson (2006), ‘DP6005 Direct Evidence of Dividend Tax Clienteles‘, CEPR Discussion Paper No. 6005. CEPR Press, Paris & London. https://cepr.org/publications/dp6005