Order imbalance on ex-dividend days

In this article we test an alternative to the tax-based explanation for why prices decline on ex-dividend days by an amount less than the dividend. We examine whether there is order imbalance on cum- and ex-dividend days. We find that on ex-dividend days, there are more buys than sells in the number of orders, but not in the number of shares ordered, and the imbalance in the number of orders is limited to small orders. We find that the difference between the dividend amount and the ex-dividend-day price drop is significantly related to the magnitude of the buy-sell order imbalance. We find no order imbalance on cum-dividend days in either the number of orders or the number of shares ordered.