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Cum-Fake: Improper Dividend Withholding Tax Reclaims through Pre-Release ADRs

Author

Listed:
  • Murphy, David

    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Todtenhaupt, Maximilian

    (Institute of Public Finance, Leibniz University Hannover)

  • Zoutman, Floris T.

    (Dept. of Business and Management Science, Norwegian School of Economics)

Abstract

Cum-fake schemes use pre-release ADRs without underlying shares to create dividend withholding tax (DWT) refund claims. Using daily ADR data for 2008–2019 and a triple differences design, we document lending patterns consistent with these schemes. Before 2014, excess dividend-window ADR lending equaled 0.35% of issuer market value in DWT countries, versus 0.04% for U.K. ADRs, where dividends generally face no DWT. This gap vanished after the SEC intensified scrutiny in 2014. ADR and underlying security prices show no persistent wedge. Calibration suggests a tax revenue loss of $264–640 million.

Suggested Citation

  • Murphy, David & Todtenhaupt, Maximilian & Zoutman, Floris T., 2026. "Cum-Fake: Improper Dividend Withholding Tax Reclaims through Pre-Release ADRs," Discussion Papers 2026/14, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2026_014
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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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