The Market for Record-Date Ownership

37 Pages Posted: 20 Mar 2002

See all articles by Susan Kerr Christoffersen

Susan Kerr Christoffersen

University of Toronto - Rotman School of Management; Copenhagen Business School

Adam V. Reed

University of North Carolina Kenan-Flagler Business School

Christopher Geczy

University of Pennsylvania - The Wharton School, Finance Department

David K. Musto

University of Pennsylvania - Finance Department

Date Written: July 4, 2002

Abstract

A share's ownership of record can trade separately from its beneficial ownership, through equity loans. In a year of transactions by a major lender, we analyze the market for ownership of record on dates when this ownership is important: the record dates of votes, when loans transfer votes, and of distributions, when loans determine the direct recipient of the distributions. On voting record dates, the lender's loan volume is high relative to surrounding days, particularly so for proposals related to lagging firms and of those, especially the proposals with close votes. Loan volume associates with greater support for shareholder proposals, and weaker support for management proposals. We also find substantial lending on dividend record dates of firms with reinvestment discounts and loan pricing that is low but increasing with the implied profit. On the record dates of Canadian firms' dividends we find that U.S. investors subject to withholding can reclaim 95% of the marginal unit of dividend yield using equity loans. We also find that, consistent with the Canadian dividend tax credit, the stock market capitalizes this marginal unit at more than its full cash value. For the cross section of Canadian firms these findings predict, and portfolio data confirm, that dividends reduce investment by U.S., relative to Canadian, institutions.

Note: Previously titled The Market for Legal Ownership

Keywords: Equity Lending, Shareholder Proposals, Dividend Arbitrage

JEL Classification: G35, G34, G15

Suggested Citation

Christoffersen, Susan E. and Reed, Adam V. and Geczy, Christopher Charles and Musto, David K., The Market for Record-Date Ownership (July 4, 2002). Available at SSRN: https://ssrn.com/abstract=302522 or http://dx.doi.org/10.2139/ssrn.302522

Susan E. Christoffersen (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416 946 5647 (Phone)
416 971 3048 (Fax)

HOME PAGE: http://www.rotman.utoronto.ca/schristoffersen

Copenhagen Business School

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Adam V. Reed

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Christopher Charles Geczy

University of Pennsylvania - The Wharton School, Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
(215) 898-1698 (Phone)
(215) 898-6200 (Fax)

David K. Musto

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

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