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Time Variation of Ex-Dividend Day Stock Returns and Corporate Dividend Capture: A Reexamination

Author

Listed:
  • Andy Naranjo

    (Warrington College of Business Administration, University of Florida)

  • M. Nimalendran

    (Warrington College of Business Administration, University of Florida)

  • Mike Ryngaert

    (Warrington College of Business Administration, University of Florida)

Abstract

This paper documents some empirical facts about ex-day abnormal returns to high dividend yield stocks that are potentially subject to corporate dividend capture. We find that average abnormal ex-dividend day returns are uniformly negative in each year after the introduction of negotiated commission rates and that time variation in ex-day returns during the negotiated commission rates era is consistent with corporate tax-based dividend capture. Ex-day returns are more negative when the tax advantage to corporate dividend capture is greatest and more positive when increases in transaction costs and risk reduce incentives to engage in corporate tax-based dividend capture. Copyright The American Finance Association 2000.

Suggested Citation

  • Andy Naranjo & M. Nimalendran & Mike Ryngaert, 2000. "Time Variation of Ex-Dividend Day Stock Returns and Corporate Dividend Capture: A Reexamination," Journal of Finance, American Finance Association, vol. 55(5), pages 2357-2372, October.
  • Handle: RePEc:bla:jfinan:v:55:y:2000:i:5:p:2357-2372
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    Citations

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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. Mihir A. Desai & William M. Gentry, 2004. "The Character and Determinants of Corporate Capital Gains," NBER Chapters,in: Tax Policy and the Economy, Volume 18, pages 1-36 National Bureau of Economic Research, Inc.
    3. Jeff Whitworth & Yi Zhang, 2010. "Accrued capital gains and ex-dividend day pricing," Managerial Finance, Emerald Group Publishing, vol. 36(8), pages 680-702, July.
    4. Henk, Berkman & Rebel, Cole & Fu, Lawrence, 2005. "Agency Conflicts, Expropriation and Firm Value: Evidence from Securities-Market Regulation in China," MPRA Paper 52619, University Library of Munich, Germany.
    5. Albert J. Menkveld & Emiliano Pagnotta & Marius A. Zoican, 2013. "Central Clearing and Asset Prices," Tinbergen Institute Discussion Papers 13-181/IV/DSF67, Tinbergen Institute.
    6. William M. Getry & Deen Kemsley & Christopher J. Mayer, 2003. "Dividend Taxes and Share Prices: Evidence from Real Estate Investment Trusts," Journal of Finance, American Finance Association, vol. 58(1), pages 261-282, February.
    7. Jaideep Chowdhury & Gokhan Sonaer, 2016. "Ex-dividend day abnormal returns for special dividends," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 40(4), pages 631-652, October.
    8. Blau, Benjamin M. & Fuller, Kathleen P. & Van Ness, Robert A., 2011. "Short selling around dividend announcements and ex-dividend days," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 628-639, June.
    9. Bali, Rakesh & Francis, Jack Clark, 2016. "Ex day effects of the 2003 dividend tax cut," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 11-22.
    10. Oliver Zhen Li, 2010. "Tax-Induced Dividend Capturing," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(7-8), pages 866-904.
    11. Asimakopoulos, Panagiotis N. & Tsangarakis, Nickolaos V. & Tsiritakis, Emmanuel D., 2015. "Price adjustment method and ex-dividend day returns in a different institutional setting," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 1-12.

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