Taxation, Dividend Payments and Ex-Day Price Changes

The purpose of the paper is to study the effects of taxation on dividend payments and ex-dividend price changes in Sweden during 1991-1995. Under this period, dividends and capital gains were taxed at a flat rate. Tax changes in Sweden during the 1990s thus provide an opportunity to include direct measures of the tax treatment of dividends and capital gains in the empirical analysis, in contrast to previous studies. The results indicate that tax reforms have large effects on dividend payments, while the effects on ex-dividend price changes are less conclusive.