To own or not to own: Stock loans around dividend payments

• 成果类型: Article
• 署名作者: Dixon, Peter N.; Fox, Corbin A.; Kelley, Eric K.
• 署名单位: U.S. Securities & Exchange Commission (SEC); James Madison University; University of Tennessee System; University of Tennessee Knoxville
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.12.010
• 发表日期: 2021
• 关键词: Stock loans; Securities lending; Short selling; Dividend arbitrage

摘要

In a standard stock loan, the borrower reimburses the lender any dividends paid while the loan is outstanding. Since these substitute dividends may be taxed differently than dividend payments themselves, some investors have incentives to either remove their shares from lendable supply-if they pay high taxes on substitute dividends-or lend out their shares to arbitrageurs-if they pay high taxes on dividends. Consistent with these incentives, we find a significant tightening of the equity lending market on dividend record days driven by both a contraction of supply and an expansion of demand-although the demand effect appears to dominate. We then exploit the plausibly exogenous nature of these shifts to causally link tightness in the lending market to wider effective spreads in the stock market. (C) 2020 Elsevier B.V. All rights reserved.