Institutional Ownership and Ex-Dividend Day Behaviour: Evidence from Sweden

Sammanfattning: This study examines the influence of ownership on ex-dividend prices and trading behaviours. Using institutional ownership as a proxy for ownership heterogeneity, allows us to investigate if tax differences, dividend preferences, transaction costs differences and risk affect the price and trading volume around the ex-dividend day. Heterogeneity is a concave function of institutional ownership and the relations between institutional ownership and abnormal returns and volumes around the ex-dividend day are therefore expected to be non-linear. We test the expected relations with an event study and regression analysis, and find that abnormal returns are a concave function of institutional ownership on the cum-dividend day, while on the ex-dividend day a convex relationship is found. No support is found for the expected concave function between abnormal volume and institutional ownership, and neither do we find support for a dividend clientele effect. Therefore, we suggest that a combination of short- and long-term traders are setting the equilibrium price, where the degree of influence short-term traders have is dependent on ownership heterogeneity.