Payout Policy Tax Clienteles, Ex-Dividend Day Stock Prices and Trading Behavior in Germany : The Case of the 2001 Tax Reform

This paper examines the impact of the German 2001 tax reform, where Germany switched from a full imputation system to a classical system. Theory suggests that both price drop ratios and trading volume decrease following the reform. We document a signi cant reduction in the valuation of net dividends - in particular for high dividend yield stocks - and weakening payout policy tax clienteles. Ex-dividend day returns are likely to be driven by short-term traders. Though the reform removed incentives for cross-border dividend stripping and reduced tax heterogeneity among investors, we show that the high trading volume around ex-dividend days persists