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Taxation, Dividend Payments and Ex-Day Price Changes

  • Daunfeldt, Sven-Olov

    ()

    (Högskolan i Gävle)

  • Selander, Carina

    ()

    (Department of Economics, Umeå University)

  • Wikström, Magnus

    ()

    (Department of Economics, Umeå University)

The purpose of the paper is to study the effects of taxation on dividend payments and ex-dividend price changes in Sweden during 1991-1995. Under this period, dividends and capital gains were taxed at a flat rate. Tax changes in Sweden during the 1990s thus provide an opportunity to include direct measures of the tax treatment of dividends and capital gains in the empirical analysis, in contrast to previous studies. The results indicate that tax reforms have large effects on dividend payments, while the effects on ex-dividend price changes are less conclusive.

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Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 684.

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Length: 28 pages
Date of creation: 02 Jun 2006
Date of revision:
Handle: RePEc:hhs:umnees:0684
Contact details of provider: Postal:
Department of Economics, Umeå University, S-901 87 Umeå, Sweden

Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
Web page: http://www.econ.umu.se/
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  1. Lakonishok, Josef & Vermaelen, Theo, 1986. "Tax-induced trading around ex-dividend days," Journal of Financial Economics, Elsevier, vol. 16(3), pages 287-319, July.
  2. Andreas Charitou & Nikos Vafeas, 1998. "The Association Between Operating Cash Flows and Dividend Changes: An Empirical Investigation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(1&2), pages 225-249.
  3. James M. Poterba & Lawrence H. Summers, 1984. "New Evidence that Taxes Affect the Valuation of Dividends," NBER Working Papers 1288, National Bureau of Economic Research, Inc.
  4. Tim Jenkinson & Leonie Bell, 2000. "New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor," Economics Series Working Papers 24, University of Oxford, Department of Economics.
  5. John H. Boyd & Ravi Jagannathan, 1994. "Ex-dividend price behavior of common stocks," Staff Report 173, Federal Reserve Bank of Minneapolis.
  6. Frank, Murray & Jagannathan, Ravi, 1998. "Why do stock prices drop by less than the value of the dividend? Evidence from a country without taxes," Journal of Financial Economics, Elsevier, vol. 47(2), pages 161-188, February.
  7. James M. Poterba & Lawrence H. Summers, 1984. "The Economic Effects of Dividend Taxation," Working papers 343, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. James Poterba, 2004. "Taxation and Corporate Payout Policy," NBER Working Papers 10321, National Bureau of Economic Research, Inc.
  9. Michael Bradley & Dennis R. Capozza & Paul J. Seguin, 1998. "Dividend Policy and Cash-Flow Uncertainty," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(4), pages 555-580.
  10. Elton, Edwin J & Gruber, Martin J, 1970. "Marginal Stockholder Tax Rates and the Clientele Effect," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 68-74, February.
  11. Green, Richard C. & Rydqvist, Kristian, 1999. "Ex-day behavior with dividend preference and limitations to short-term arbitrage: the case of Swedish lottery bonds," Journal of Financial Economics, Elsevier, vol. 53(2), pages 145-187, August.
  12. Skinner, David Lynn, 1993. "Twenty-five Years of Tax Law Changes and Investor Response," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 16(1), pages 61-70, Spring.
  13. Short, Helen & Zhang, Hao & Keasey, Kevin, 2002. "The link between dividend policy and institutional ownership," Journal of Corporate Finance, Elsevier, vol. 8(2), pages 105-122, March.
  14. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  15. Barclay, Michael J., 1987. "Dividends, taxes, and common stock prices : The ex-dividend day behavior of common stock prices before the income tax," Journal of Financial Economics, Elsevier, vol. 19(1), pages 31-44, September.
  16. Miller, Merton H. & Scholes, Myron S., 1978. "Dividends and taxes," Journal of Financial Economics, Elsevier, vol. 6(4), pages 333-364, December.
  17. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
  18. Gaver, Jennifer J. & Gaver, Kenneth M., 1993. "Additional evidence on the association between the investment opportunity set and corporate financing, dividend, and compensation policies," Journal of Accounting and Economics, Elsevier, vol. 16(1-3), pages 125-160, April.
  19. M. S. Feldstein, 1970. "Corporate Taxation and Dividend Behaviour," Review of Economic Studies, Oxford University Press, vol. 37(1), pages 57-72.
  20. Sudipto Bhattacharya, 1979. "Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 259-270, Spring.
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