The investors' order behavior and stock price behavior around ex-dividend days in Taiwan

This dissertation contains two essays on the ex-date anomaly issue. The first essay examines various types of investors’ order behavior around ex-dividend dates on the Taiwan Stock Exchange. We find that, different types of investors show entirely different patterns of order flows. For both taxable and non-taxable samples, small investors’ order behavior around ex-dividend days is consistent with the price drop hypothesis, which suggests that small investors prefer low-priced stocks. We find weaker evidence consistent with the tax hypothesis: foreigners and large domestic investors who are tax-disadvantaged avoid participating in taxable dividends. We also find strong evidence that tax-neutral institutions play the role of short-term arbitrageurs around ex-dividend dates.
The second essay explores stock price behavior around ex-dividend days and the reasons why we observe the abnormal returns on the ex-date. The empirical results reveal that reasons except tax result in the abnormal returns on the ex-date in the both taxable and non-taxable samples. The distribution rate of stock dividends can explain the anomaly on the ex-date in the non-taxable sample. The tax effect hypothesis、price drop hypothesis and tick size hypothesis give no explanations for the anomalous stock prices on the ex-date. We also find that, the significant negative abnormal returns in day -3 in the margin trading sample is due to a forbidden margin purchase starting from day -3.