Institutional trading around the ex-dividend day

Authors

Andrew B. Ainsworth, University of Sydney
Kingsley Y. L Fong, University of New South Wales
David R. Gallagher, University of New South Wales, Australia; Capital Markets CRC Limited, Sydney, Macquarie UniversityFollow
Graham H. Partington, University of SydneyFollow

RIS ID

118852

Publication Details

Ainsworth, A., Fong, K. Y. L., Gallagher, D. R. & Partington, G. (2016). Institutional trading around the ex-dividend day. Australian Journal of Management, 41 (2), 299-323.

Abstract

This study uses the trading records of institutional equity funds to examine their ex-dividend trading behaviour. We argue that trading is influenced by the tax incentives facing the fund, the characteristics of individual stocks and by changes in tax legislation. In aggregate, institutions trade to avoid the dividend and franking credit. Changes in tax incentives and the fund's tax status also affect ex-dividend day trading, with unit trusts dominating the dividend avoidance trades. The results indicate that taxes, transactions costs and the cum-dividend price run-up influence the trading of institutional investors around the ex-dividend day.