Tax Reform and Ex‐Dividend Day Behavior

  • Author(s): JOSEF LAKONISHOK, THEO VERMAELEN
  • Published: Apr 30, 2012
  • Pages: 1157-1179
  • DOI: 10.1111/j.1540-6261.1983.tb02289.x

ABSTRACT

This paper investigates the effect of a major Canadian tax reform on the ex‐dividend day behavior of companies on the Toronto Stock Exchange. The results are inconsistent with the hypothesis that price changes on ex‐dividend days reflect the relative taxation of dividends and capital gains for the “representative” investor, but are consistent with the hypothesis that ex‐dividend day price behavior reflects short‐term trading activities.

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