Odd-lot Costs and Taxation Influences on Stock Dividend Ex-dates
<heading id="h1" level="3" format="inline" implicit="no">Abstract: </heading>Past research has revealed significant abnormal ex-date returns for stock dividends even though the ex-date is known in advance and the distribution contains no new information. Various researchers have suggested that the higher transaction cost of selling odd-lot share parcels compared to round-lot share parcels is a key driver in the abnormal returns. However, no study to date has directly compared the ex-date price reaction of stock dividends distributed when odd-lot transaction costs were charged to those issued when odd-lot costs were not evident. As odd-lot trade costs were eliminated from the New Zealand Stock Exchange on 1 October, 1991, the New Zealand market provides a unique opportunity to directly test the role, if any, that odd-lot transactions costs have in explaining stock dividend ex-date returns. We find that prior to October 1991 stock dividend ex-dates exhibit significantly positive returns, however, we do not find any significant ex-date return once the higher odd-lot transaction costs were removed. The New Zealand market also enables us to examine an imputation tax based argument of the ex-date price reaction and we find evidence that imputation tax credits have a value greater than zero. Copyright Blackwell Publishers Ltd, 2004.
Year of publication: |
2004-11
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Authors: | Anderson, Hamish D. ; Rose, Lawrence C. ; Cahan, Steven F. |
Published in: |
Journal of Business Finance & Accounting. - Wiley Blackwell, ISSN 0306-686X. - Vol. 31.2004-11, 9-10, p. 1419-1448
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Publisher: |
Wiley Blackwell |
Saved in:
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