Multiple clientele influence on ex-dividend day price performance

This paper considers a change in U.S. dividend taxation for qualified public utility stocks from 1982 through 1985. The change affects some of the highest dividend-yielding U.S. stocks and allows individuals to defer payment of income tax on dividends, ultimately paying tax at capital gains rates, and reduces individual income tax rates. This paper examines these stocks' ex-dividend day performance before, during, and after this tax-law change. Results provide evidence that multiple clienteles, not a single marginal investor, determine ex-dividend day pricing for these stocks.