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Who Wants to Trade Around Ex-Dividend Days?

We examine order flows around ex-dividend dates on the Taiwan Stock Exchange. By using Taiwan’s data, we can examine the heterogeneity of investors’ behavior around ex-dividend dates to test different hypotheses. We find that for both taxable and nontaxable samples, small investors sell before the ex date and buy from the ex date, suggesting that small investors prefer low-priced stocks. We find weaker evidence that tax-disadvantaged foreign and large domestic investors avoid participating in taxable dividends. We find strong evidence that tax-neutral institutions play the role of short-term arbitrageurs around ex-dividend dates.