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Can firm-specific dividend drop-off ratios be used to infer shareholder marginal tax rates?

Journal Article


Abstract


  • In a seminal study, Elton and Gruber (1970) argue that ex-dividend day pricing can be used to infer marginal tax rates of shareholders. We examine ex-dividend day pricing for individual firms and ask whether their CFOs could use the history of a firm's ex-dividend price-drop ratios to infer reasonable estimates of shareholders' marginal tax rates. We use TAQ data for 1,124 US firms that have at least 30 ex-dividend days during the period August 1993 to October 2012. Our results show that ex-dividend day pricing is so noisy as to prohibit sensible estimates of shareholders' marginal tax rates.

Authors


  •   Ainsworth, Andrew
  •   Lee, Adrian (external author)
  •   Walter, Terry S. (external author)

Publication Date


  • 2018

Citation


  • Ainsworth, A., Lee, A. D. & Walter, T. (2018). Can firm-specific dividend drop-off ratios be used to infer shareholder marginal tax rates?. Accounting and Finance, Online first 1-28.

Scopus Eid


  • 2-s2.0-85041196765

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/1408

Number Of Pages


  • 27

Start Page


  • 1

End Page


  • 28

Volume


  • Online first

Place Of Publication


  • Australia

Abstract


  • In a seminal study, Elton and Gruber (1970) argue that ex-dividend day pricing can be used to infer marginal tax rates of shareholders. We examine ex-dividend day pricing for individual firms and ask whether their CFOs could use the history of a firm's ex-dividend price-drop ratios to infer reasonable estimates of shareholders' marginal tax rates. We use TAQ data for 1,124 US firms that have at least 30 ex-dividend days during the period August 1993 to October 2012. Our results show that ex-dividend day pricing is so noisy as to prohibit sensible estimates of shareholders' marginal tax rates.

Authors


  •   Ainsworth, Andrew
  •   Lee, Adrian (external author)
  •   Walter, Terry S. (external author)

Publication Date


  • 2018

Citation


  • Ainsworth, A., Lee, A. D. & Walter, T. (2018). Can firm-specific dividend drop-off ratios be used to infer shareholder marginal tax rates?. Accounting and Finance, Online first 1-28.

Scopus Eid


  • 2-s2.0-85041196765

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/1408

Number Of Pages


  • 27

Start Page


  • 1

End Page


  • 28

Volume


  • Online first

Place Of Publication


  • Australia