Work

Why do stock prices drop by less than the value of the dividend? Evidence from a country without taxes

Year: 1998

Type: article

Abstract: It is well documented that stock prices on ex-dividend days drop by less than the value of the dividend, on average. This has commonly been attributed to the effect of tax clienteles. We examine data from the Hong Kong stock market, where neither dividends nor capital gains are taxed. As in the U.S., the average stock price drop is less than the value of the dividend; specifically, the average dividend for the period 1980–1993 is HK $0.12 and the average price drop is HK $0.06. We are able to account for this both theoretically and empirically through market microstructure arguments.

Source: Journal of Financial Economics

DOI: 10.1016/s0304-405x(97)80053-0

Authors: Murray Frank, Ravi Jagannathan

Institutions: University of British Columbia, Northwestern University, University of Minnesota

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: University of Michigan, Michigan State University, Tel Aviv University

OpenAlex ID: W1997575896

FWCI: 15.57

Cites: 25

Cited by: 270

Related to: 10