The Ex-Dividend Day Stock Price Behavior in the Chinese Stock Market
24 Pages Posted: 15 Jun 2002
Date Written: April 17, 2002
This paper analyzes the ex-dividend day stock price behavior in the Chinese stock market. This market, where dividends could be either taxable or non-taxable, allows us to examine the impact of tax effects while keeping any microstructure factors constant. The findings from non-taxable stocks show that their price, on the ex-dividend day, falls by an amount that equals the dividend. For the taxable sample, stock prices of small dividend yield stocks drop proportionally to the dividend paid. For the large dividend yield stocks, the price adjustment depends on the effective tax rate on dividend income. The overall findings are consistent with the tax hypothesis.
Keywords: Dividends; Ex-dividend day; Dividend puzzle
JEL Classification: G12; G35
Suggested Citation: Suggested Citation