n Management Dynamics : Journal of the Southern African Institute for Management Scientists - Transaction costs as the primary explanation for the ex-dividend price drop-off : the case of South African shares under the dual currency system

Volume 11, Issue 1
  • ISSN : 1019-567X



This study considers the price drop-off following 232 dividend payments by firms listed on the Johannesburg Stock Exchange (JSE) during 1993. For foreign exchange and tax reasons, there were two clienteles in this market that would have preferred a cash dividend to a similarly sized capital gain. Given the normal tax effect explanation for the size of the ex-dividend price drop-off, this should have resulted in price drop-offs larger than the dividend amount. Instead, we measure price drop-offs smaller than the dividend amount, consistent with a transaction costs explanation. Our results show that transaction costs caused price drop-offs to be smaller than the dividend paid in this particular market, and provide support for a transaction costs explanation for similar price drop-offs encountered in other markets.

Loading full text...

Full text loading...


Article metrics loading...


This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error