Are ex‐day dividend clientele effects dead? Dividend yield versus dividend size

We devise an approach to determine whether market microstructure or taxes influence ex‐dividend behavior. We find that microstructure effects of automated limit order adjustments strongly influence ex‐day prices for dividends less than or equal to a tick. For these dividends, after controlling for dividend size, we find no relation between price‐drop‐to‐dividend ratio and dividend yield. For larger dividends, both microstructure and tax effects are found: Consistent with the microstructure story we find that between ticks, as dividend sizes increase (hence dividend yields increase), price‐drop‐to‐dividend ratios decrease. However, consistent with the tax clientele hypothesis, when dividend size is fixed, a positive relation between price‐drop‐to‐dividend ratio and yield is still seen.