Abstract
By effectively removing the differential taxation of dividends and capital gains, the 1986 Tax Reform Act provides a unique opportunity to re-examine the “tax induced clientele” explanation of ex-dividend day price behavior. The analysis indicates an increased preference for dividends and provides evidence of significant abnormal volume during the ex-dividend period, consistent with dividend induced trading activity. In addition, the level of dividend preference is found to be far greater on the organized exchanges than in OTC trading.
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Manakyan, H., Liano, K. & Huang, G.C. The 1986 Tax Reform Act and ex-dividend day price and volume patterns: Evidence from organized exchanges and the OTC market. J Econ Finan 17, 135–147 (1993). https://doi.org/10.1007/BF02920089
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DOI: https://doi.org/10.1007/BF02920089