TWENTY‐FIVE YEARS OF TAX LAW CHANGES AND INVESTOR RESPONSE

David Lynn Skinner

Journal of Financial Research, 1993, vol. 16, issue 1, 61-70

Abstract: Ex‐dividend day research detects dividend‐clientele effects that the tax‐clientele hypothesis attributes to personal taxation. In this study I examine all ten personal tax changes between 1963 and 1988 and find little support for the tax‐clientele hypothesis. Few tax changes are accompanied by significant changes in the ex‐day ratio, and more than half are opposite the direction predicted. In particular, the largest tax changes, in 1982 and 1987, fail to support the tax‐clientele hypothesis. The results are consistent with some unknown, non‐tax‐induced clientele effect(s).

Date: 1993
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