The Market Value of UK Dividends from Shares with Differing Entitlements

Journal of Business Finance and Accounting 33, Jan/Mar 2006, pp. 220-44

37 Pages Posted: 18 Oct 2014

See all articles by Seth Armitage

Seth Armitage

University of Edinburgh - Accounting and Finance

Lynn Hodgkinson

Bangor Business School

Graham Partington

University of Sydney - School of Business - Finance Discipline; Financial Research Network (FIRN)

Date Written: August 2005

Abstract

This paper determines the market value of dividends in the UK during periods before and after 1997. Previous studies, which use the ex-dividend day method, tend to provide noisy and potentially biased measures of dividend value. We estimate the value of dividends from the prices of shares that are identical except for their dividend entitlements, and are traded concurrently (within the same hour). We argue that our estimates of dividend value are the cleanest yet available for the UK. Our evidence suggests that ex-dividend day estimates are biased downwards, but that this bias may be mitigated by the use of robust regression. Dividend values are heterogeneous and are not explained by the tax-clientele hypothesis.

Keywords: Dividend value, personal taxes, market microstructure, ex-dividend day method

Suggested Citation

Armitage, Seth and Hodgkinson, Lynn and Partington, Graham, The Market Value of UK Dividends from Shares with Differing Entitlements (August 2005). Journal of Business Finance and Accounting 33, Jan/Mar 2006, pp. 220-44, Available at SSRN: https://ssrn.com/abstract=2511231

Seth Armitage (Contact Author)

University of Edinburgh - Accounting and Finance ( email )

29 Buccleuch Place
Edinburgh, EH8 9JS
United Kingdom
44 131 650 3794 (Phone)

Lynn Hodgkinson

Bangor Business School ( email )

Bangor, Wales LL57 2DG
United Kingdom

Graham Partington

University of Sydney - School of Business - Finance Discipline ( email )

Building H69
Sydney NSW, 2006
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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