Ex-Dividend Day Returns when Dividend and Capital Gains are Taxed at the Same Rate

Josef García Blandón, Monica Martinez-Blasco () and Josef Argiles Bosch
Additional contact information
Josef García Blandón: Department of Economics and Finance, Facultat d'Economia, IQS, Universitat Ramon Llull, http://www.iqs.edu/
Josef Argiles Bosch: Department of Economics and Finance, Facultat d'Economia, IQS, Universitat Ramon Llull, http://www.ub.edu/economiaempresa/relint/eng/index.html

Czech Journal of Economics and Finance (Finance a uver), 2011, vol. 61, issue 2, 140-152

Abstract: Due to the overwhelming international evidence that stock prices drop by less than the dividend paid on ex-dividend days, the ex-dividend day anomaly is considered a stylized fact. Two main approaches have emerged to explain this empirical regularity: the tax-clientele hypothesis and the microstructure of financial markets. Although the most widely accepted explanation for this fact relies on taxes, the ex-dividend day anomaly has been reported even in countries where neither dividends nor capital gains are taxed. The 2006 tax reform in Spain established the same tax rate for dividends and capital gains. This paper investigates stock returns on ex-dividend days in the Spanish stock market after the 2006 tax reform using a random coefficient model. Contrary to previous research, we do not observe an ex-dividend day anomaly. Unlike previous investigations, which are mostly concerned with suggesting explanations as to why this anomaly has occurred, we are in the somewhat strange position of discussing why this anomaly has not occurred. Our findings are robust across companies and stock dividend yields, thus supporting a tax-based explanation for the ex-dividend day anomaly.

Keywords: ex-dividend days; tax-clientele hypothesis; random coefficient model; tax neutrality (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://journal.fsv.cuni.cz/storage/1209_blandon.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:61:y:2011:i:2:p:140-152

Access Statistics for this article

More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Natalie Svarcova ().