Tax preference theory
Tax preference theory is a theory that proposes that investors prefer capital gains over dividends, because capital gains taxes can be deferred into the future but taxes on dividends must be paid as the dividends are received.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Tax preference theory. Proposes that investors prefer capital gains over dividends, because capital gains taxes can be deferred into the future but taxes on dividends must be paid as the dividends are received.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
