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Consistent with the tax clientele theory, we find that for the overall sample period, ex-dividend price behavior is systematically related to how capital gains and dividends are taxed.
Another key prediction of the tax clientele model is that sometime before the ex-date, lower dividend yield stocks will end up in the hands of investors for whom dividends are taxed more heavily, while higher yield stocks end up with investors who are taxed at lesser rates.
are the tax clientele for the tax-exempt bonds; in other words, they are
Secondary issues examined include the concept of tax clientele, basic differences in the taxation of capital gains and ordinary income, basic differences in the tax consequences of holding mutual funds versus individual stock portfolios, and the characteristics of tax-efficient mutual funds.
If a true yield advantage exists, it could be due to a tax clientele effect (e.
Finesand began his career as a tax lawyer in New York, serving a broad direct investment, corporate finance and tax clientele.
Because it is conditioned on the tax clientele of dividend-paying stocks changing with the dividend tax cut, we call this case the "dynamic tax-clientele hypothesis.
Our main conclusion is that both transactions costs and tax clientele effects are too small to explain the premium, even when synchronous prices are used instead of closing prices.
As Lakonishok and Vermaelen [15] point out, if corporate cum-ex trading is concentrated in high-yield securities, this will lead to larger price drops for high-yield securities - an outcome very similar to the tax clientele effect.
Scholes and Wolfson (1992), for example, argue that tax clienteles are "pervasive.
The traditional tax clienteles modeled by Elton and Gruber (1970) fall into this category.
Thus, as in the Miller analysis, capital structure irrelevance results and tax clienteles form in which investors will hold either equity or debt.