We develop a neoclassical partial equilibrium model to analyze the dynamic efiects of permanent and temporary dividend tax policies on corporate investment and flnancing decisions. Facing a tax system with corporate and personal income taxes, dividend tax and capital gains tax, a flrm decides how much to invest and how to flnance investment by equity or debt subject to collateral constraints and capital adjustment costs. We characterize steady state and simulate transitional dynamics following tax policy changes. We flnd the following novel results: First, both temporary and permanent dividend tax changes do not have long-run efiects on a flrm’s capital formation, but have short-run efiects on its investment and flnancial policies. Second, an anticipated temporary dividend tax cut has a short-run efiect of lowering investment, similar to an anticipated permanent dividend tax increase. Third, a flrm responds asymmetrically to an anticipated permanent dividend tax increase versus an anticipated permanent dividend tax cut due to the collateral constraint. Finally, in anticipation of future tax changes, the flrm engages in tax arbitrage by borrowing or saving in order to transfer corporate earnings across time so as to reduce shareholder’s tax burden.