An Examination of Ex-dividend Day Stock Price Movements: The Case of Nontaxable Master Limited Partnership Distributions

Wayne H Shaw

Journal of Finance, 1991, vol. 46, issue 2, 755-71

Abstract: This study examines the unit (stock) price and volume behavior of master limited partnerships around the ex-dividend day. Since the dividends of master limited partnerships are not taxable to the unitholder, tax-based hypotheses predict no abnormal unit movements around the ex-day. Significant positive excess returns and volume are found before the ex-dividend day, and significant negative excess returns are found on the ex-dividend day. The findings, which are not significantly impacted by the Tax Reform Act of 1986, suggest ex-day stock movements are not solely a function of investor marginal tax rates or corporate trading behavior. Copyright 1991 by American Finance Association.

Date: 1991
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