ODD-LOT COSTS, TAXES AND THE EX-DATE PRICE EFFECTS OF STOCK DIVIDENDS: EVIDENCE FROM THE TORONTO STOCK EXCHANGE.

The article focuses on odd-lot taxes and the exudate price effects of stock dividends, citing evidence from the Toronto stock exchange. US studies on the price effect of stock dividends, have found significantly positive abnormal returns on the ex-dividend date. The primary objective of this paper is to examine the effect of transaction costs, on the ex-date returns of stocks paying stock dividends, by analyzing a market in which there are no odd-lot order costs. A secondary objective of this paper is to measure the impact of taxes on common shares paying stock dividends, by analyzing the effect of changes in the tax treatment of stock dividends on ex-date returns. The article is organized as follows. The next section reviews the literature on the ex-date price reaction of firms paying stock dividends. The third section discusses the Canadian market and stock dividends. The fourth, fifth and sixth sections discuss hypotheses, data and methodology, respectively. The empirical findings are examined in the seventh section and the final section provides the conclusions.