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Who Wants to Trade Around Ex‐Dividend Days?

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  • Shing‐yang Hu
  • Yun‐Ian Tseng

Abstract

We examine order flows around ex‐dividend dates on the Taiwan Stock Exchange. By using Taiwan's data, we can examine the heterogeneity of investors' behavior around ex‐dividend dates to test different hypotheses. We find that for both taxable and nontaxable samples, small investors sell before the ex date and buy from the ex date, suggesting that small investors prefer low‐priced stocks. We find weaker evidence that tax‐disadvantaged foreign and large domestic investors avoid participating in taxable dividends. We find strong evidence that tax‐ neutral institutions play the role of short‐term arbitrageurs around ex‐dividend dates.

Suggested Citation

  • Shing‐yang Hu & Yun‐Ian Tseng, 2006. "Who Wants to Trade Around Ex‐Dividend Days?," Financial Management, Financial Management Association International, vol. 35(4), pages 95-119, December.
    • Handle: RePEc:bla:finmgt:v:35:y:2006:i:4:p:95-119
    DOI: 10.1111/j.1755-053X.2006.tb00161.x
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    References listed on IDEAS

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    Cited by:

    1. Ming-Chang Cheng & Ching-Hwa Lee, 2016. "Trading Activities Around Ex-Dividend Days: Evidence from the Taiwan Stock Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(01), pages 1-17, March.
    2. Wang, Jin-Ying, 2014. "Controlling shareholder entrenchment: Bonuses versus dividends," International Review of Economics & Finance, Elsevier, vol. 32(C), pages 143-158.
    3. Chen, Hung-Ling & Chow, Edward H. & Shiu, Cheng-Yi, 2013. "Ex-dividend prices and investor trades: Evidence from Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 24(C), pages 39-65.
    4. Justin Cox & Kathleen P. Fuller & Robert Van Ness, 2024. "Where does ex‐dividend trading occur: An examination of trading venues around dividends," The Financial Review, Eastern Finance Association, vol. 59(1), pages 31-55, February.
    5. Gene Amromin & Paul Harrison & Steven Sharpe, 2008. "How Did the 2003 Dividend Tax Cut Affect Stock Prices?," Financial Management, Financial Management Association International, vol. 37(4), pages 625-646, December.
    6. Jeff Whitworth & Ramesh P. Rao, 2010. "Do Tax Law Changes Influence Ex‐Dividend Stock Price Behavior? Evidence from 1926 to 2005," Financial Management, Financial Management Association International, vol. 39(1), pages 419-445, March.
    7. Ainsworth, Andrew & Lee, Adrian D., 2023. "Sharing the dividend tax credit pie: The influence of individual investors on ex-dividend day returns," Journal of Financial Markets, Elsevier, vol. 62(C).
    8. Tseng, Yun-lan & Hu, Shing-yang, 2013. "Tax reform and the identity of marginal traders around ex-dividend days," Pacific-Basin Finance Journal, Elsevier, vol. 25(C), pages 181-199.

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