Stock Market Behavior on Ex-Dividend Dates: The Case of Cum-Ex Transactions in Germany

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Publication Details

Author(s): Büttner T, Holzmann C, Kreidl F, Scholz H
Publication year: 2017
Language: English


Abstract


This paper explores whether stock-market arbitrage exploits profit opportunities arising from tax fraud. We focus on so-called cum-ex trades. These trades rest on the issuance of withholding-tax certificates that can be used for a tax-credit or refund without previous withholding-tax payment. We provide a theoretical analysis showing that without false tax certificates cum-ex trades would be unprofitable. Furthermore, we show that if profit opportunities associated with the false tax certificates are exploited, cum-ex trading alters the price-drop ratio at the ex-dividend day. The empirical analysis provides evidence using data of German stocks for the years 2009 to 2015. Our identification strategy exploits variation in the withholding-tax liability of dividends as well as differences in the withholding-tax procedure over time. The results indicate that price-drop ratios at ex-dividend days can be explained by cum-ex trades. Consistent with cum-ex trading, the data also shows large increases in trading volumes around ex-dividend dates.



FAU Authors / FAU Editors

Büttner, Thiess Prof. Dr.
Lehrstuhl für Volkswirtschaftslehre, insbesondere Finanzwissenschaft
Holzmann, Carolin Dr.
Lehrstuhl für Volkswirtschaftslehre, insbesondere Finanzwissenschaft
Kreidl, Felix
Lehrstuhl für Betriebswirtschaftslehre, insbesondere Finanzierung und Banken
Scholz, Hendrik Prof. Dr.
Lehrstuhl für Betriebswirtschaftslehre, insbesondere Finanzierung und Banken


How to cite

APA:
Büttner, T., Holzmann, C., Kreidl, F., & Scholz, H. (2017). Stock Market Behavior on Ex-Dividend Dates: The Case of Cum-Ex Transactions in Germany.

MLA:
Büttner, Thiess, et al. Stock Market Behavior on Ex-Dividend Dates: The Case of Cum-Ex Transactions in Germany. 2017.

BibTeX: 

Last updated on 2018-10-08 at 22:28