Professor Jana Raedy

The economic experts and political pundits may debate whether President George W. Bush's big cut in the dividend tax rate last year fueled a broad economic recovery.

Raedy, an assistant professor of accounting at UNC Kenan-Flagler, and two colleagues made a splash earlier this year with a well-timed study of the tax cut's impact on corporate dividends.

Professor Jana Raedy

Examining the first three-month period after the unprecedented rate slash took effect in spring 2003, they found that it did not produce widespread dividend increases by America's publicly traded companies, as intended by its promoters.

The study, widely covered by the financial press, stirred so much interest in the subject that Raedy and her two co-authors are now extending their investigation.

The study revealed that while a few companies did boost dividends significantly in that critical first quarter, those that did tended to be firms that are heavily held by insiders. Moreover, they largely handed out special, one-time dividends instead of raising their regular quarterly dividends. As a result, total dividends for the 1,202 sample firms rose 9 percent from $35 billion to $38 billion in the quarter.

"At least in the short run, it really triggered the payment of special dividends" by firms with "very high insider ownership," says Raedy, who came to UNC Kenan-Flagler in fall 1997. In other words, she says, firm managers largely paid out special dividends to themselves.

Although they haven't gone over the data from the next quarter yet, Raedy suspects that the results will be the same. "My guess is that it's not going to matter," she says.

Other Raedy Research With Significance to SEC Reconciliation Rules
Raedy has also scored with other, vastly different studies in the international accounting area. In a series of notable papers over several years, she probed the impact of certain accounting reporting requirements on foreign companies wishing to trade their stock in the United States. While she found that market analysts don't pay much attention to the data in these "reconciliation" reports, the accounting rules do keep other companies with more to hide from trading in the United States.

"Our results were certainly consistent with that notion," she says. "No one had looked at it before."

In another study, just published last year, Raedy concluded that reporting requirements have not been very effective in providing greater insight into foreign firms' financial position and performance. "I suspect there'll be some more (studies) in this series," she says.

Raedy, who grew up on a farm in southern Ohio, turned exclusively to accounting after earning twin undergraduate degrees in accounting and agricultural economics at the University of Kentucky and then a master's degree in agricultural economics from the same school. Formerly a practicing CPA, she earned her PhD in accounting from Penn State University.