Institutional Trading Around the Ex-Dividend Day

Ainsworth, Andrew; Fong, Kingsley Y. L.; Gallagher, David R.; Partington, Graham

Institutional Trading Around the Ex-Dividend Day

Australian Journal of Management, Vol. 41, No. 2, 2016

Posted: 4 May 2016

See all articles by Andrew Ainsworth

Andrew Ainsworth

University of Wollongong - School of Accounting, Economics & Finance; Financial Research Network (FIRN)

Kingsley Y. L. Fong

University of New South Wales - School of Banking and Finance; Financial Research Network (FIRN)

Graham Partington

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

There are 2 versions of this paper

Date Written: May 1, 2016

Abstract

This study uses the trading records of institutional equity funds to examine their ex-dividend trading behaviour. We argue that trading is influenced by the tax incentives facing the fund, the characteristics of individual stocks and by changes in tax legislation. In aggregate, institutions trade to avoid the dividend and franking credit. Changes in tax incentives and the fund’s tax status also affect ex-dividend day trading, with unit trusts dominating the dividend avoidance trades. The results indicate that taxes, transactions costs and the cum-dividend price run-up influence the trading of institutional investors around the ex-dividend day.

Keywords: Capital Gains Tax, Dividends, Ex-Dividend Day, Institutional Trading, Tax Credits

Suggested Citation: Suggested Citation

Ainsworth, Andrew and Fong, Kingsley Y. L. and Gallagher, David R. and Partington, Graham, Institutional Trading Around the Ex-Dividend Day (May 1, 2016). Australian Journal of Management, Vol. 41, No. 2, 2016. Available at SSRN: https://ssrn.com/abstract=2774371