A note on transaction costs and the interpretation of dividend drop-off ratios

Partington, G; Walker, S

A note on transaction costs and the interpretation of dividend drop-off ratios

Partington, G Walker, S

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Publication Type:: Journal Article
Citation:: Accounting and Finance, 2001, 41 (3), pp. 229 - 241
Issue Date:: 2001-11-01

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Field	Value	Language
dc.contributor.author	Partington, G	en_US
dc.contributor.author	Walker, S https://orcid.org/0000-0002-7130-6520	en_US
dc.date.issued	2001-11-01	en_US
dc.identifier.citation	Accounting and Finance, 2001, 41 (3), pp. 229 - 241	en_US
dc.identifier.issn	0810-5391	en_US
dc.identifier.uri	http://hdl.handle.net/10453/5190
dc.description.abstract	In a recent edition of this Journal, Bartholdy and Brown (1999) presented an analysis of the ex-dividend share price behaviour of shares listed on the New Zealand Stock Exchange. The authors conclude that their results are consistent with the tax clientele effect (driven by long-term investors) and that there is little or no support for the short-term trading hypothesis. Our purpose is to highlight the importance of transaction costs in analyses such as Bartholdy and Brown's. We argue that their results have an alternative interpretation because their analysis excludes the impact of transaction costs. We extend their model to include transaction costs and show that their results are not necessarily inconsistent with the short-term trading hypothesis. A critical point of our analysis is that, in the presence of transaction costs, the equilibrium drop-off ratio for dividend strip traders will be less than one, and, in some cases, can be less than the equilibrium drop-off ratio for long-term investors. © AAANZ 2001.	en_US
dc.relation	http://purl.org/au-research/grants/arc/C10010019
dc.relation.ispartof	Accounting and Finance	en_US
dc.subject.classification	Accounting	en_US
dc.title	A note on transaction costs and the interpretation of dividend drop-off ratios	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	41	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	closed_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	41	en_US

Abstract:

In a recent edition of this Journal, Bartholdy and Brown (1999) presented an analysis of the ex-dividend share price behaviour of shares listed on the New Zealand Stock Exchange. The authors conclude that their results are consistent with the tax clientele effect (driven by long-term investors) and that there is little or no support for the short-term trading hypothesis. Our purpose is to highlight the importance of transaction costs in analyses such as Bartholdy and Brown's. We argue that their results have an alternative interpretation because their analysis excludes the impact of transaction costs. We extend their model to include transaction costs and show that their results are not necessarily inconsistent with the short-term trading hypothesis. A critical point of our analysis is that, in the presence of transaction costs, the equilibrium drop-off ratio for dividend strip traders will be less than one, and, in some cases, can be less than the equilibrium drop-off ratio for long-term investors. © AAANZ 2001.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/5190