The Impact of the 1986 Tax Reform Act on Ex-Dividend Day Returns

Ashok J. Robin

Financial Management, 1991, vol. 20, issue 1

Abstract: The 1986 Tax Reform Act, by virtue of equalizing the marginal tax rates of dividend and capital gains income for the ordinary investor, is hypothesized to decrease the ex-day abnormal returns, and to reduce the incidence and effects of short-term trading. As predicted, ex-day abnormal returns are found to decline significantly in both the NYSE and the ASE. In contrast, increased effects of short-term trading are found among the high dividend yield quintile stocks of the NYSE.

Date: 1991
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