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Twenty‐Five Years Of Tax Law Changes And Investor Response

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  • David Lynn Skinner

Abstract

Ex‐dividend day research detects dividend‐clientele effects that the tax‐clientele hypothesis attributes to personal taxation. In this study I examine all ten personal tax changes between 1963 and 1988 and find little support for the tax‐clientele hypothesis. Few tax changes are accompanied by significant changes in the ex‐day ratio, and more than half are opposite the direction predicted. In particular, the largest tax changes, in 1982 and 1987, fail to support the tax‐clientele hypothesis. The results are consistent with some unknown, non‐tax‐induced clientele effect(s).

Suggested Citation

  • David Lynn Skinner, 1993. "Twenty‐Five Years Of Tax Law Changes And Investor Response," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 16(1), pages 61-70, March.
    • Handle: RePEc:bla:jfnres:v:16:y:1993:i:1:p:61-70
    DOI: 10.1111/j.1475-6803.1993.tb00127.x
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    Cited by:

    1. Sven-Olov Daunfeldt & Carina Selander & Magnus Wikstrom, 2009. "Taxation, Dividend Payments and Ex-Day Price-Changes," Multinational Finance Journal, Multinational Finance Journal, vol. 13(1-2), pages 135-154, March-Jun.
    2. Sven-Olov Daunfeldt, 2007. "Tax-Induced Trading and the Identity of the Marginal Investor: Evidence from Sweden," The European Journal of Finance, Taylor & Francis Journals, vol. 13(7), pages 657-667.
    3. Casey, K. Michael & Dickens, Ross N., 2000. "The effects of tax and regulatory changes on commercial bank dividend policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(2), pages 279-293.
    4. Jeff Whitworth & Ramesh P. Rao, 2010. "Do Tax Law Changes Influence Ex‐Dividend Stock Price Behavior? Evidence from 1926 to 2005," Financial Management, Financial Management Association International, vol. 39(1), pages 419-445, March.

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