Using a sample of Australian stocks during the 1996–2014 period, this study examines how tax heterogeneity between domestic and foreign investors affects trading behaviour and stock prices around the ex-dividend day. Domestic investors prefer dividends and tend to buy stocks cum-dividend and sell them ex-dividend whereas foreign investors tend to trade in the opposite direction. Abnormal trading turnover increases with tax heterogeneity. Moreover, stocks with a larger domestic investor base are associated with a higher price drop-off ratio on the ex-dividend day and higher market value of franking credits. Overall, our findings support the dynamic dividend clientele hypothesis.<p></p>
Publication Date
2020-12-01Journal
Accounting and FinanceVolume
60Issue
4Pagination
38p. (p. 3775-3812)Publisher
WileyISSN
0810-5391Rights Statement
© 2019 Accounting and Finance Association of Australia and New Zealand
This is the peer reviewed version of the following article: Nguyen NAL; Yin X & Zhao J (2020). Effects of investor tax heterogeneity on stock prices and trading behaviour around the ex-dividend day: the case of Australia. Accounting and Finance, 60(4), 3775-3812, which has been published in final form at http://doi.org/10.1111/acfi.12520. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
