TY - JOUR
T1 - Ex-dividend day returns when dividend and capital gains are taxed at the same rate
AU - García Blandón, Josep
AU - Martínez Blasco, Mònica
AU - Argiles Bosch, Josep
PY - 2011
Y1 - 2011
N2 - 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.
AB - 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.
KW - Ex-dividend days
KW - Random coefficient model
KW - Tax neutrality
KW - Tax-clientele hypothesis
UR - http://www.scopus.com/inward/record.url?scp=79959580715&partnerID=8YFLogxK
M3 - Article
AN - SCOPUS:79959580715
SN - 0015-1920
VL - 61
SP - 140
EP - 152
JO - Finance a Uver - Czech Journal of Economics and Finance
JF - Finance a Uver - Czech Journal of Economics and Finance
IS - 2
ER -