Funds must distribute all dividends and net realized short-term and long-term capital gains to their investors each year. Investors have to pay tax on these distributions. We find that funds whose distributions are taxable pay lower dividends than funds whose distributions are tax-deferred. Taxable funds also distribute relatively lower short-term and long-term capital gains. This suggests that funds take into account the tax preferences of their investors in making investment decisions. Link to the article
YADAV, V. (2016). Tax Preferences of Investors and Fund Investments. Economics Letters, 143, pp. 90-93.