This paper reports evidence on the consequences of differential tax treatment for domestic and foreign owners in a market with a high degree of foreign ownership for certain stocks, the Helsinki Stock Exchange (HSE). We find that ex-dividend day ratios vary with the degree of foreign ownership, and detect significantly abnormal ex-dividend day trading volumes. The average ex-dividend price drops for high-yield, high-foreign ownership stocks are likely to lie outside no-arbitrage boundaries for domestic taxable investors. An investigation of short selling through a derivatives instrument also reveals significant excess trading volumes in ex-dividend months. The tax heterogeneity of the company's ownership structure seems to play a role in explaining deviations from dividend neutrality, more deviations are observed for companies with a more homogeneous ownership structure in terms of taxation.

In this paper, we investigate the magnitude of the benefits from international diversification from the Nordic point of view. Special attention is paid to whether potentially increased co-movement of stock markets together with more volatile Nordic currencies have resulted in decreased benefits from international diversification towards the end of the 1980s. Moreover, the paper presents evidence on the benefits from international diversification for a currency which has recently started its free float, the Finnish markka (FIM). We find significant increases in stock market co-movement. Both unhedged ex ante strategies as well as strategies hedged for exchange rate risk are investigated, revealing substantial benefits from international diversification for the Nordic countries. However, we obtain mixed results concerning the question of the optimality of hedging.

This paper investigates the Morellec and Zhdanov (2008) (MZ) prediction that firms strategically underleverage to win takeover contests. We document support for several specific MZ model predictions: pre-bid underleveraging increases with bidding competition, synergies offered by targets, investment type, industry concentration, and with firms actively adjusting their capital structure in advance of bidding. An empirically verified financial frictions explanation does not fully account for these patterns. Taken together, we find consistent evidence that strategic underleveraging conditional on the acquisition outlook is an important determinant of capital structure dynamics.