The Ex‐Dividend Day Behavior of Canadian Stock Prices: Tax Changes and Clientele Effects

  • Author(s): L. D. BOOTH, D. J. JOHNSTON
  • Published: Apr 30, 2012
  • Pages: 457-476
  • DOI: 10.1111/j.1540-6261.1984.tb02320.x


With some simple assumptions the ex‐dividend day price drop and the associated dividend can be used to measure the market's marginal tax rate. Previous research has estimated the implied tax rate for the U.S. This paper extends the analysis to Canada, where the tax treatment of dividends and capital gains is completely different from that in the U.S. The paper also presents estimates from 1970–80 to include four distinct periods when the tax treatment was different. Hence, we include an implied test of market efficiency as well as those for the “relevance” of taxes and the existence of tax based dividend clienteles.

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