Cum-Fake: Improper Dividend Withholding Tax Reclaims Through Pre-Release ADRs

David Murphy, Maximilian Todtenhaupt and Floris T. Zoutman

No 13106, CESifo Working Paper Series from CESifo

Abstract: Cum-fake schemes use pre-release ADRs without underlying shares to create dividend withholding tax (DWT) refund claims. Using daily ADR data for 2008–2019 and a triple-differences design, we document lending patterns consistent with these schemes. Before 2014, excess dividend-window ADR lending equaled 0.35% of issuer market value in DWT countries, versus 0.04% for U.K. ADRs, where dividends generally face no DWT. This gap vanished after the SEC intensified scrutiny in 2014. ADR and underlying security prices show no persistent wedge. Calibration suggests a tax revenue loss of $264–640 million.

Keywords: dividend withholding tax; tax enforcement; securities lending (search for similar items in EconPapers)
JEL-codes: F23 G18 H26 K22 (search for similar items in EconPapers)
Date: 2026
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