Marginal stockholder tax rate and clientele effect in Singapore

Abstract

The objective of this research is to determine the marginal stockholder tax rate and observe whether any clientele effect exists in the Singapore stock market. In addition, to review some of the studies concerning dividend policy in some of the major stock market. Research methodology adopted includes collecting data from the Stock Exchange of Singapore journals, the Sabre Centre at the School of Accountancy and Business and other sources. Analysis were then performed to investigate the applicability of the clientele hypothesis in Singapore. The study reveals that the clientele effect in Singapore stock market is the same as that observed in the United States. This is so even when Singapore practices the imputation system of taxation while the United States uses the classical system. Our results are inconsistent with that by Ariff and Johnson (1990). Lastly, this study reviews the reasons why firms are reluctant to change dividend policy and concludes with the limitation of the study and recommending areas for further research.