Tax Versus Attention: The Ex-Date Experience In Taiwan

This paper examines ex-date stock returns on the Taiwan Stock Exchange. The special features of Taiwan's tax code offer a sharp contrast between taxable and non-taxable distributions. Therefore, the authors are able to evaluate the relative importance of tax versus non-tax explanations for the ex-date phenomenon. They find that the tax effect is at best a minor explanation for abnormal returns on the ex-dates. They argue that abnormal returns on the ex-date exist, because these stocks attract the attention of small investors.