Ex-dividend day abnormal returns for special dividends
Autor: | Gokhan Sonaer, Jaideep Chowdhury |
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Rok vydání: | 2015 |
Předmět: |
Transaction cost
Economics and Econometrics 050208 finance Financial economics 05 social sciences Dividend yield Sample (statistics) Dividend policy Market microstructure Monetary economics Short-term trading Capital (economics) 0502 economics and business Economics Dividend 050203 business & management Finance |
Zdroj: | Journal of Economics and Finance. 40:631-652 |
ISSN: | 1938-9744 1055-0925 |
Popis: | Past research shows that the difference between dividend amount and ex-dividend day price drop reflects the transaction costs and the differential in the tax rates on dividends and capital gains. Moreover, it is also documented that the higher the dividend yield, the lower is the ex-dividend day return. This paper focuses on large special dividends and tests the two competing hypothesis, tax hypothesis and short term trading hypothesis. Our focus on large special dividends is motivated by the following three considerations. First, special dividends have experienced a surge in recent years. Second, special dividends are important for dividend capture by institutions, corporations and arbitragers. Third, using a sample of large special dividends allows us to reduce the market microstructure effects and focus more directly on the two competing hypotheses. Based on a sample of large special dividends, we find that price drop on ex-dividend day is significantly less than the dividend amount. Furthermore, we show that ex-dividend day returns are positive and hence, are not fully arbitraged away. Our tests indicate that tax hypothesis explains some portion of ex-dividend day abnormal returns even for large special dividends, whereas the support for the short-term trading hypothesis is weak. |
Databáze: | OpenAIRE |
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