| Summary: | 碩士 === 東吳大學 === 會計學系 === 106 === Earnings distribution is an important issue for companies and investors. To keep the remaining profits or to distribute it as shareholders’ dividends is a crucial decision that is to be made by company’s executives. According to Income Tax Law Act 66-9, companies should be additionally taxed if they did not distribute their profits. This research is aimed at analyzing the reasons why companies choose to be additionally taxed on undistributed profit. According to Farrar & Selwyn (1967), if dividends tax rates are higher than that of capital gains tax rates, investors might prefer companies to distribute less dividends and keep the remaining profits for future investments. From observation of the product lifecycle, the reinvestment of remaining profits is a crucial factor for business growth while facing faster business cycle. Therefore, this paper that companies tend to keep the capitals when they have higher R&D expenses since they are in need of long-term working capital. Companies will keep the remaining profits or use it to reinvest in the case when the companies have more obtained through reinvestment. Finally, companies keep the remaining profits under an information asymmetry situation. In this case, keeping the remaining profits help them to avoid raising external capitals and thus keep autonomy to develop in the capital market.
|
|---|
