Further evidence from ex-dividend days

Rakesh Bali and Jack C. Francis

Applied Economics Letters, 2012, vol. 19, issue 6, 537-540

Abstract: We tested how dividend pricing is impacted by the reduction in capital gains tax rate to 20% (May 1997) and the move to trading in 6.25¢ (June 1997). Price behaviour does not support tax clienteles but is consistent with transaction costs-based explanation. Raw returns, for all groups, are within or close to weak no-arbitrage bounds and are unchanged around these events. We find that taxes may impact investor behaviour but they do not impact marginal dividend pricing.

Date: 2012
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DOI: 10.1080/13504851.2011.587763

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