Liquidity provisions by individual investor trading prior to dividend announcements: Evidence from Taiwan

Zhijuan Chen, William T. Lin, Changfeng Ma, Shih Chuan Tsai

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

This paper investigates the role of liquidity provisions played by individual investors prior to dividend announcements in Taiwan. We first document a positive relationship between aggregate individual trading before dividend announcements and abnormal stock returns in the one month after the events. We find that this positive relationship varies with liquidity. We then decompose the abnormal returns following the event into information and liquidity provision components. The information component is not significant at all, but the liquidity component is positively significant, which shows that it is individual investors' provisions of liquidity to institutional investors prior to dividend announcements that drives the positive relationship between pre-event individual trading and post-event returns.

Original languageEnglish
Pages (from-to)358-374
Number of pages17
JournalNorth American Journal of Economics and Finance
Volume28
DOIs
Publication statusPublished - 2014 Jan 1

Fingerprint

Individual investors
Taiwan
Dividend announcements
Liquidity provision
Liquidity
Institutional investors
Stock returns
Information provision
Abnormal returns

Keywords

  • Dividend announcements
  • G10
  • G14
  • G15
  • G35
  • Individual investors
  • Information
  • Liquidity provisions
  • Net individual trading

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Liquidity provisions by individual investor trading prior to dividend announcements : Evidence from Taiwan. / Chen, Zhijuan; Lin, William T.; Ma, Changfeng; Tsai, Shih Chuan.

In: North American Journal of Economics and Finance, Vol. 28, 01.01.2014, p. 358-374.

Research output: Contribution to journalArticle

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