Institutional trading around the ex-dividend day

Andrew Ainsworth, Kingsley YL Fong, David Gallagher and Graham Partington
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Andrew Ainsworth: Finance Discipline, The University of Sydney, Sydney, NSW, Australia
Kingsley YL Fong: UNSW Business School, UNSW Australia, Sydney, NSW, Australia
Graham Partington: Finance Discipline, The University of Sydney, Sydney, NSW, Australia

Australian Journal of Management, 2016, vol. 41, issue 2, 299-323

Abstract: This study uses the trading records of institutional equity funds to examine their ex-dividend trading behaviour. We argue that trading is influenced by the tax incentives facing the fund, the characteristics of individual stocks and by changes in tax legislation. In aggregate, institutions trade to avoid the dividend and franking credit. Changes in tax incentives and the fund’s tax status also affect ex-dividend day trading, with unit trusts dominating the dividend avoidance trades. The results indicate that taxes, transactions costs and the cum-dividend price run-up influence the trading of institutional investors around the ex-dividend day.

Keywords: Capital gains tax; dividends; ex-dividend day; institutional trading; tax credits (search for similar items in EconPapers)
JEL-codes: G14 G23 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:41:y:2016:i:2:p:299-323

DOI: 10.1177/0312896214539967

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