Article1991

The Impact of the 1986 Tax Reform Act on Ex-Dividend Day Returns

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

The 1986 Tax Reform Act, by virtue of equalizing the marginal tax rates of dividend and capital gains income for the ordinary investor, is hypothesized to decrease the ex-day abnormal returns, and to reduce the incidence and effects of short-term trading. As predicted, ex-day abnormal returns are found to decline significantly in both the NYSE and the ASE. In contrast, increased effects of short-term trading are found among the high dividend yield quintile stocks of the NYSE.

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1979The effect of personal taxes and dividends on capital asset prices 1983On corporate governance 1970Marginal Stockholder Tax Rates and the Clientele Effect 1982Dividends and Taxes: Some Empirical Evidence 1983Transaction costs and the small firm effect 1986Tax-induced trading around ex-dividend days

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2008Ex-Dividend Day Price and Volume: The Case of 2003 Dividend Tax Cut 2010Do Tax Law Changes Influence Ex‐Dividend Stock Price Behavior? Evidence from 1926 to 2005 1994Corporate Dividend Policy Response to the Tax Reform Act of 1986 2003Marginal Stockholder Tax Effects and Ex-Dividend Day Behavior - Thirty-Two Years Later 1999Examining the Impact of the 1986 Tax Reform Act on Corporate Dividend Policy: A New Methodology 2001Foreign and domestic investors and tax induced ex-dividend day trading 1996The Financial Performance of Low-Grade Municipal Bond Funds 1999FURTHER EVIDENCE ON DIVIDEND YIELDS AND THE EX‐DIVIDEND DAY STOCK PRICE EFFECT

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