Göran Robertsson

The paper is the first to evaluate the dividend tax clientele hypothesis using a data set of all domestic stock portfolios in the market. We find that investment funds that face a higher effective tax rate on dividend income than on capital gains tilt their portfolios away from dividend-paying stocks. These investors consequently earn a dividend yield that is about 35 basis points lower than that of investors who are tax neutral between dividends and capital gains (pension funds, unit-linked insurance, life insurance). Consistent with tax rules and charter provisions, we also find that private corporations prefer growth stocks, that foundations exhibit strong dividend preferences, and that partnerships rarely hold stocks portfolios. © 2014 Elsevier B.V.

In this paper, we characterize foreign ownership using a dataset of ownership and attributes of Swedish firms. The analysis reveals that foreigners show a preference for large firms, firms paying low dividends, and firms with large cash positions on their balance sheets. When we further analyze the preference for large firms, we find that market liquidity and presence in international markets, measured through export sales or listings on other exchanges, seem to characterize foreign holdings better than firm size alone. Foreigners also tend to underweight firms with a dominant owner. Importantly, we demonstrate that most of the features associated with foreign ownership are driven by the fact that foreign investors typically are mutual funds or other institutional investors. Hence, we identify an institutional investor bias rather than a foreign investor bias. Finally, using ownership data on a country level, we conclude that the results are particularly strong among U.S. investors, who comprise the largest institutions among foreign investors.