This study investigates the impact of personal taxation on corporate managers' choices between share repurchases and dividends as a means of disbursing cash. Consistent with the notion that personal taxation influences the choice of disbursement method, we find that managers are more likely to choose a share repurchase if the firm has a low dividend yield, if the firm's stock has experienced losses or small recent capital gains, and if the payout occured before the Tax Reform Act of 1986. Further, managers are more sensitive to the shareholders' tax situations if institutional investors hold a large fraction of the shares.

The objective of this paper is twofold. First, the paper develops a class of models of the term structure of interest rates, in the Heath, Jarrow, and Morton (1992) framework, with dynamics characterized by the evolution of a small set of state variables. Second, the paper exploits this characterization of the dynamics of the term structure in an estimation exercise that makes use of both the time series and cross-section of bond prices. In this way, our class of models bridges the gap between traditional models, such as Cox, Ingersoll, and Ross (1985) and Vasicek (1977), that emphasize the dynamics of interest rates and the models of Heath, Jarrow, and Morton (1992) that stress fitting the cross-section of bond prices.

We distinguish among the signaling, free cash flow, and wealth transfer hypotheses in explaining the stock price reaction to specially designated dividend (SDD) announcements. In a direct test of the signaling power of SDDs, we find both a larger stock price reaction and a significant upward revision of earnings forecasts for firms with Tobin's q less than one, but not for other firms. Our results support the conditional signaling hypothesis, which predicts greater effects of favorable information for low q firms. Taken together, our results for stock price effects and earnings forecast revisions do not support either the free cash flow or wealth transfer hypotheses.