Question of retained earnings?

Question

When companies don't pay dividends on large income for long and keep it aside in the pretext of protecting themselves from future competition, how do they actually protect themselves so with this without breaching antitrust laws?

Thrasher · Accepted Answer

I'll assume you are talking about a public corporation.  Many successful companies build large "war chests".  A corporation does not have to declare dividends, some prefer to offer shareholders value via an appreciating share price.  

I don't see how antitrust laws come into the equation.

Now if the IRS can prove that a company is just sitting on earnings without a good reason then there is a tax on what is basically considered a hoarding activity.  Though that is hard to prove as anyone can state that they need the money to ensure they are a going concern and can survive an economic downturn.

Question of retained earnings?

1 Answer