The Impact of Market Structure on Ex-Dividend Day Stock Price Behavior

Financial Management, Forthcoming

49 Pages Posted: 24 May 2017

See all articles by Sandra Mortal

Sandra Mortal

University of Alabama - Culverhouse College of Commerce & Business Administration

Shishir K. Paudel

Alabama A&M University - College of Business and Public Affairs

Sabatino Silveri

University of Memphis - Fogelman College of Business and Economics

Date Written: March 31, 2017

Abstract

We explore the impact of market structure on the ex-day price anomaly. Measuring the price-drop ratio (hereafter PDR) as the ratio of the price change on the ex-day to the dividend amount, we find that the average Nasdaq PDR is significantly less than one and significantly less than the NYSE PDR. We then investigate a subset of firms that voluntary switch from Nasdaq to the NYSE and find that the PDR significantly increases after the switch suggesting that market structure impacts PDRs. We also create a matched sample and find that the Nasdaq PDR converges toward its matched NYSE counterpart, particularly after the introduction of SuperMontage. Our evidence is consistent with significant Nasdaq market structure changes reducing execution cost differences between the two exchanges and, in turn, reducing the PDR difference. Overall, our results highlight the important role market structure can play in our understanding of anomalies.

Keywords: Dividends; Taxes; Asset Pricing; Market Microstructure; Transaction Costs; Nasdaq; NYSE; Exchange Switchers

JEL Classification: G10; G12; G35; H20; H24

Suggested Citation

Mortal, Sandra and Paudel, Shishir K. and Silveri, Sabatino, The Impact of Market Structure on Ex-Dividend Day Stock Price Behavior (March 31, 2017). Financial Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2972204

Sandra Mortal

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

Shishir K. Paudel (Contact Author)

Alabama A&M University - College of Business and Public Affairs ( email )

4900 Meridian Street North
Normal, AL 35762
United States
2563725064 (Phone)

Sabatino Silveri

University of Memphis - Fogelman College of Business and Economics ( email )

3675 Central Avenue
Memphis, TN 38152
United States

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