Dividends Without Taxes: Empirical Evidence from Hong Kong

Posted: 3 Jun 1998

See all articles by Murray Z. Frank

Murray Z. Frank

University of Minnesota

Ravi Jagannathan

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER); Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF); Indian School of Business (ISB), Hyderabad

Date Written: Undated

Abstract

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

Frank, Murray Z. and Jagannathan, Ravi, Dividends Without Taxes: Empirical Evidence from Hong Kong (Undated). Available at SSRN: https://ssrn.com/abstract=7572

Murray Z. Frank

University of Minnesota ( email )

Carlson School of Management
321 19th Avenue South
Minneapolis, MN 55455
United States
612-625-5678 (Phone)

Ravi Jagannathan (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
429 Andersen Hall
Evanston, IL 60208
United States
847-491-8338 (Phone)
847-491-5719 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

Indian School of Business (ISB), Hyderabad ( email )

Hyderabad, Gachibowli 500 019
India

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