Effects of investor tax heterogeneity on stock prices and trading behaviour around the ex‐dividend day: the case of Australia. (7th August 2019)

• Record Type: Journal Article
• Authors: Le, Nguyen Ngoc Anh; Yin, Xiangkang; Zhao, Jing
• Is Part Of: Accounting and finance. Volume 60:Number 4(2020)
• Page Start: 3775
• Page End: 3812
• Publication Date: 2019-08-07
• Subjects: Ex‐dividend day -- Tax heterogeneity -- Dividend imputation; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12520
• Languages: English
• ISSNs: 0810-5391

Abstract

Abstract: Using a sample of Australian stocks during the 1996–2014 period, this study examines how tax heterogeneity between domestic and foreign investors affects trading behaviour and stock prices around the ex‐dividend day. Domestic investors prefer dividends and tend to buy stocks cum‐dividend and sell them ex‐dividend whereas foreign investors tend to trade in the opposite direction. Abnormal trading turnover increases with tax heterogeneity. Moreover, stocks with a larger domestic investor base are associated with a higher price drop‐off ratio on the ex‐dividend day and higher market value of franking credits. Overall, our findings support the dynamic dividend clientele hypothesis.