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The Clientele Effect in the Brazilian Market: Are Investors Irrational?

Author

Listed:
  • Jairo Laser Procianoy

    (EA/UFRGS)

  • Rodrigo dos Santos Verdi

    (The Wharton School, University of Pennsilvanya)

Abstract

This work tests the dividend clientele effect in the Brazilian stock market between 1989 and 1993, a period during which there no dividends taxes varied between zero and 25% according to shareholders group. From a sample of 693 events studied, 47% showed first ex-dividend day stock price higher than in the previous day. These findings were against theoretical predictions and investors attitudes may be considered irrational because they were paying more for ex-dividend shares than for cum-dividend ones. Sample segmentation by year showed no difference. Financial institutions and first group stock yield had lower abnormal returns than other. Positive abnormal returns of 1,4% in the first ex-dividend day was found, 0,1% significant. Five days abnormal returns following last cum-dividends day study showed that stock prices increased and returned to the original price few days later.

Suggested Citation

  • Jairo Laser Procianoy & Rodrigo dos Santos Verdi, 2003. "The Clientele Effect in the Brazilian Market: Are Investors Irrational?," Brazilian Review of Finance, Brazilian Society of Finance, vol. 1(2), pages 217-242.
    • Handle: RePEc:brf:journl:v:1:y:2003:i:2:p:217-242
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    More about this item

    Keywords

    dividends; taxes; clientele effect; Brazil;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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