Data and sample overview

The primary data source used in this study is the Amadeus database, provided by Bureau van Dijk. Amadeus contains accounting statements (e.g., balance sheets and income statements) for private firms in Europe. Table 2.D1 (Appendix) outlines the sample selection process. I restrict the sample to active German corporations that were established before the year 2007 in order to exclude start-up companies.²⁰ Furthermore, I focus on corporations that are not stand-alone²¹ and have current financial data. After restricting my data further to firms with unconsolidated German-GAAP financial data, I exclude all types of partnerships that the Amadeus database wrongly identified as corporations, to ensure that my sample includes only companies, which determine and tax their profits according to the German Corporate Income Tax Act.²²

After selecting the firms, I hand-collect data on ownership structures from the Amadeus database and the commercial register entries for each corporation.²³ Recent empirical studies exploit static ownership structures, which depend on the latest database updates (e.g., Michaely and Roberts, 2011) or the date of the survey (e.g., Nagar et al., 2011). Data on comprehensive and detailed ownership structures are rare (e.g., Jacob and Michaely, 2017).

The hand-collected data allow me to observe dynamic ownership structures for every year of my sample so that I can precisely observe changes in the ownership structure and hence the reaction of corporate shareholders with minority stakes to the dividend tax reform.

To be part of my sample, the previously selected German corporations had to have at least one German corporate shareholder with a directly held ownership stake of less than 20% during

20 The overall data collection process lasted from the mid of 2018 until the mid of 2019.

21 The corporation has a corporate global ultimate owner in the EU. This characteristic allows me to employ my third cross-sectional test. I restrict my sample to global ultimate owners, which are resident in the EU because EU regulations and the common market support the comparability between my observations.

22 In addition, I verify whether my sample includes tax group structures as then a minority shareholder receives a compensation payment instead of dividends. To mitigate this issue, I check all corporations with a profit of zero, which can be an indicator for a profit transfer agreement and hence a tax group (Oestreicher and Koch, 2010). However, my sample does not include potential tax group structures.

23 The Amadeus database only provides the most recent ownership structure. However, the download of the ownership history per company is possible but requires a single export per company.

26 the years 2010 until 2012 (pre-reform).²⁴ I exclude observations with missing ownership stakes. To avoid confounding events and reactions, I check for restructuring processes²⁵ (e.g., mergers and takeovers) during the sample period, as well as potential bankruptcies by requiring that firms and shareholders were active for three years after the sample period ends (from 2016 to 2018). In addition, I exclude corporate shareholders that are non-profit corporations, public institutions, banks, holding and insurance companies because the dividend tax reform did not apply to them. Further, I also exclude firms and shareholders that are listed on a stock exchange to ensure that all of the firms and shareholders operate on illiquid markets. Finally, I check for indirect ownership stakes of shareholders and exclude shareholders with a total ownership stake above 20% to enhance the comparability between shareholders from the treatment and the control group and hence avoid any misspecifications in my identification strategy.

The final sample comprises 4,074 firm-shareholder-year observations for the years 2010 to 2015. Table 2.2 provides information about the sample distribution. The 4,074 firm-shareholder-year observations comprise 2,970 treated observations and 1,104 observations from the control group (Panel A). Panel B reveals that my sample consists of 495 observations from the treatment group and 184 observations from the control group per year. In Panel C, I provide the sample distribution of firm-shareholder-year observations per firm-level and shareholder-level industry. Panel C shows that industries are, in general, evenly distributed between not only firms and shareholders but also between the treated and control observations.

24 I employ a rather restrictive identification strategy to ensure that shareholders from the treatment and control group are comparable and do not only follow short-term investment incentives. However, I test the robustness of the results for my two hypotheses by employing an identification strategy, which requires that the German corporations had at least one German corporate shareholder with a directly held ownership stake of less than 20%

in 2012 (the year before the reform). I use the less restrictive sample over a period from 2012-2015 and re-estimate my two baseline DiD regressions (Eq. (1) and (2)). The results are fully consistent with my main findings, indicating that my restrictive identification strategy does not affect my results (see Table 2.D2 (Appendix)).

25 I check for restructuring processes by using the database Northdata, which provides company information on German firms.

27

Panel B: Sample distribution of firm-shareholder observations per year

2010 2011 2012 2013 2014 2015 Total

Treatment group 495 495 495 495 495 495 2,970

Control group 184 184 184 184 184 184 1,104

Total 679 679 679 679 679 679 4,074

Panel C: Sample distribution of firm-shareholder-year observations per industry

Firm industry Shareholder industry

Treated Control Treated Control

Obs. % Obs. % Obs. % Obs. % distribution of firm-shareholder observations per year (Panel B) and the sample distribution of firm-shareholder-year observations per industry (Panel C). The industry classification in Panel C is based on NACE codes. While the total number of firm industry observations in Panel C is 4,074, the number of shareholder industry observations is 3,120 because I do not observe the NACE code for every shareholder in my sample.

28

Notes: This table provides summary statistics for the period 2010-2015 for different samples: Panel A is based on firm-shareholder-year-level observations, and Panel B is based on firm-year-level observations. All variables are defined in Table 2.D3 (Appendix).

Table 2.3 presents summary statistics separately for treatment and control group observations based on firm-shareholder-level (Panel A) and firm-level data (Panel B).²⁶ Table 2.D3

26 Since my final sample with controls is not balanced due to missing data, I test the robustness of the results for my two hypotheses if I force the sample to be balanced. I use the balanced sample to re-estimate my two baseline DiD regressions (Eq. (1) and (2)). The results are fully consistent with my main findings, indicating that missing observations do not affect my results (see Table 2.D4 (Appendix)).

29 (Appendix) lists detailed variable definitions. The results of the summary statistics in Table 2.3 show that corporate shareholders have on average a minority stake of 3.51% in a German corporation and that corporate shareholders from the control group own on average a stake of 12.95% in a German corporation. This implies that shareholders from the control group do not own sufficient shares to be involved in the firm’s decision-making process and as a result, are comparable to treated corporate shareholders. With regard to the firm and shareholder control variables, observations from the treatment and control group are very similar in terms of size, cash and leverage.