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Taxes and Ex-Dividend Day Returns: Evidence From REITs


  • Li, Oliver Zhen
  • Weber, David P.


The distributions of Real Estate Investment Trusts (REITs) are comprised of components that differ in how they are taxed to the recipient shareholders. This variation in tax characteristics enables us to study the effect of shareholder taxes on stock prices around ex-dividend days, while avoiding the problems associated with non-tax confounding factors and intertemporal tests that have hampered the interpretation of previous studies. Using a dataset that includes the component makeup of individual REIT distributions, we provide evidence that abnormal returns and trading volume around ex-dividend days are driven by the component of the distributions that is most tax-penalized. Our results support a tax-based explanation for ex-dividend day pricing and investor trading behavior.

Suggested Citation

  • Li, Oliver Zhen & Weber, David P., 2009. "Taxes and Ex-Dividend Day Returns: Evidence From REITs," National Tax Journal, National Tax Association, vol. 62(4), pages 657-676, December.
  • Handle: RePEc:ntj:journl:v:62:y:2009:i:4:p:657-76

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    Cited by:

    1. Erik Devos & Andrew Spieler & Desmond Tsang, 2014. "Elective Stock Dividends and REITs: Evidence from the Financial Crisis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(1), pages 33-70, March.
    2. Barclay, Michael J. & Heitzman, Shane M. & Smith, Clifford W., 2013. "Debt and taxes: Evidence from the real estate industry," Journal of Corporate Finance, Elsevier, vol. 20(C), pages 74-93.
    3. Jeff Whitworth & David A. Carter, 2010. "The Ex‐Day Price Behavior of REITs: Taxes or Ticks?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(4), pages 733-752, Winter.

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