This dissertation examines changes in corporate dividend policies in response to the tax-regime change resulting from the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). It is shown that firms at different stages of the life cycle have significantly different responses in dividend policy to the change in dividend taxation, after controlling for profitability, investment opportunities, free cash flow, firm size, leverage,liquidity, and the rate of economic growth. Low- and moderate-payout firms responded to JGTRRA by increasing their payout ratios, while the highest-payout firms reduced their payout ratios after 2003. A significant portion of the increased propensity to pay dividends in the post-JGTRRA period can be explained by the increase in the propensity of growing companies to pay dividends as they mature. This result is consistent with the firm lifecycle hypothesis.
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