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Tax Rebate and Dividend Payout in Bangladesh
Sharif Nurul Ahkam, Shahzada Muhammad Imran, Syeda Marjia Hossain
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DOI:10.17265/1537-1514/2014.09.001
Sharif Nurul Ahkam, D.B.A., professor, Eastern University, Dhanmondi, Dhaka-1205, Bangladesh.
Shahzada Muhammad Imran, M.Sc. in information systems, lecturer, North South University, Bashundhara, Dhaka-1229, Bangladesh.
Syeda Marjia Hossain, M.Sc. in Financial Management, lecturer, North South University, Bashundhara, Dhaka-1229, Bangladesh.
The purpose of this paper is to examine the effects of the introduction of 20% tax rebate in 2002 for certain firms on the dividend policy of firms potentially qualifying for this rebate in Bangladesh. A balanced panel data set of 63 non-financial firms of Bangladesh for 14 (1998-2011) years from the Dhaka stock exchange is used for this purpose. Newey-West estimator is used to estimate a logit model and the specified model uses binary values of 0 and 1 to identify if it met the tax rebate threshold. The explanatory variables are firm size, log of market value to face value ratio and profitability. A dummy variable was used to separate the pre-rebate period (2003 and before) from post-rebate period (after 2003). The dummy variable turned out to be insignificant indicating that introduction of the tax rebate had no impact on dividend policy of qualifying firms.
dividend, tax rebate, Newey-West estimator, logit model
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