The ex-dividend day stock price behavior in the Chinese stock market |
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Affiliation: | 1. College of Management, Yuan Ze University, 135 Yuandung Road, Jungli, 32003 Taoyuan, Taiwan;2. AI-ECON Research Center, Department of Economics, National Chengchi University, No. 64, Sec. 2, ZhiNan Rd., Wenshan District, Taipei City 11605, Taiwan |
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Abstract: | This paper analyzes the ex-dividend day stock price behavior in the Chinese stock market. This market allows 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 is not statistically different from the dividend. For the taxable sample, stock prices of small dividend yield stocks fall 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. |
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