All else the same, an investor is likely to prefer a firm with a high dividend payout if marginal tax rates on capital gains exceed marginal tax rates on dividends.

Question

Quizplus · Accepted Answer

If the tax rate on dividends is lower than that on capital gains, investors would prefer receiving dividends now rather than waiting for capital gains, as it would result in a lower tax burden.

All Else the Same, an Investor Is Likely to Prefer