Dividends Without Taxes: Empirical Evidence from Hong Kong
Posted: 3 Jun 1998
Date Written: Undated
Due to the simplicity of the tax code, Hong Kong is an important test case for many financial theories. This paper studies the price drop on the ex-dividend date in Hong Kong. As in the USA the average price drop is less than the value of the dividends. During the 1980-92 period, the average dividend amount is HK$0.16 whereas the average price drop is HK$0.08. Since there are no taxes on dividends nor on capital gains, these observations cannot be due to taxes. We demonstrate that this can be explained by market microstructure effects.
JEL Classification: G14
Suggested Citation: Suggested Citation