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UBC Theses and Dissertations

Dividends, taxes and investor clienteles Downie, David C.


This thesis explores two facets of the Miller-Modigliani theorem; dividend irrelevance and value additivity. We explore these concepts in the capital market using a derivative asset recently introduced and a Black-Scholes option pricing model modified for different marginal tax rates. This technology was used to solve for the retention rates for dividend and capital gains implied in these instruments. These implied rates do not support the Miller-Modigliani hypothesis for Canada nor the United States. We find a significant, persistent premia on dividend income consistent with the clientele hypotheses in the literature.

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