An Impact of Investor Tax Heterogeneity on Ex-Dividend Trading: Evidence from Australia

51 Pages Posted: 22 Aug 2014

See all articles by Anh Le

Anh Le

La Trobe University - Business School

Xiangkang Yin

Deakin University; Financial Research Network (FIRN)

Jing Zhao

La Trobe University - School of Economics and Finance; Financial Research Network (FIRN)

Date Written: August 22, 2014

Abstract

This paper provides an investigation of the trading volume around the ex-dividend day and its determinations in an Australian context. This is achieved by examining ex-dividend events of a sample of S&P/ASX 300 stocks during the period from 2008 to 2012. The principal aim of the paper is to examine the impact of investors’ tax heterogeneity on ex-dividend day abnormal trading volume. Our results show that investors’ tax heterogeneity increases abnormal trading volume around the ex-dividend day, consistently with the expectation of the dynamic tax-induced hypothesis. Our results are consistent with different measures of tax heterogeneity. Further, we find that franking credit has a significant role in widening the tax heterogeneity among investors and thus motivating trading around the ex-day.

Keywords: Ex-dividend, Trading Volume, Institutional Ownership, Franking Credit, Dividend imputation system

JEL Classification: G12, G14, G32

Suggested Citation

Le, Anh and Yin, Xiangkang and Zhao, Jing, An Impact of Investor Tax Heterogeneity on Ex-Dividend Trading: Evidence from Australia (August 22, 2014). 27th Australasian Finance and Banking Conference 2014 Paper. Available at SSRN: https://ssrn.com/abstract=2485053 or http://dx.doi.org/10.2139/ssrn.2485053

Anh Le (Contact Author)

La Trobe University - Business School ( email )

La Trobe University
Bundoora VIC 3083
Melbourne, Victoria 3083
Australia

Xiangkang Yin

Deakin University ( email )

Melbourne, Victoria
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Jing Zhao

La Trobe University - School of Economics and Finance ( email )

Dept of Economics and Finance
La Trobe University
Bundoora, VIC 3086
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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