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In 2004 Norwegian authorities announced a reform introducing dividend taxation for personal (but not corporate) owners to take effect starting in 2006. This change provided incentives to maximize dividends in 2004 and 2005, and to retain earnings in the following years. Using Norwegian registry data that cover the universe of nonpublicly traded firms, we find that dividend payments responded very strongly to the anticipated reform, but also that much of the response was compensated by reinjecting shareholder equity in the same firms. On the other hand, following the reform, firms began to retain earnings. While all categories of assets grow, the increase in durable assets categories that include equipment, machinery, company cars, planes, and boats is particularly striking. We find that personally owned firms and those that pursued aggressive dividend maximization policy in anticipation of the reform exhibit lower …