How the introduction of stock repurchases affects dividend payouts under a full imputation system?

兩稅合一下實施庫藏股對股利政策之影響？

This study investigates whether the introduction of repurchases in 2000 affects the payout policy of TWSE (Taiwan Stock Exchange)-listed firms. For this purpose, we adopt Lintner’s (1956) model for both cash dividends and total payouts to examine the perfect substitute effect. The introduction of dividend imputation and stock repurchases does increase total payout ratios. We find that cash dividends are stickier than total payouts in Lintner’s model. Under a full imputation system as well as a tax-free capital gain environment, TWSE-listed firms do not substitute stock repurchases for dividends. Additionally, Taiwan stock market is classified as having poor legal shareholder protection market that is attributed to the dividend substitute model (La Porta et al., 2000). However, our finding is consistent with the dividend outcome model that firms with strong corporate governance have higher dividend payouts than firms with weak corporate governance.