Time: 10:00 a.m., Tuesday, March 24, 2026

Venue: Room 503, Starr Building, Guoshun Campus

Host: Professor Chenkai Ni

Speaker: Oliver Zhen Li (National University of Singapore)

Topic: Tax Complexity and Dividend Capturing

Abstract: The 2012 tax reform in China introduced tax complexity by negatively linking the dividend tax rate to shareholding period. Leveraging account-level data that precisely capture the timing, size, direction, and prices of retail investors' trades, we document a significant sorting effect associated with the increased complexity in dividend tax treatment. Specifically, the reform discourages participation in dividend-capturing strategies among retail investors with lower financial literacy. Among those who engaged in dividend capturing, financially literate investors earned a higher return and exhibit greater return sensitivity to dividend yield. Our findings suggest that greater tax complexity can induce a sorting mechanism, whereby only a subset of retail investors possess the necessary literacy to benefit from tax-sensitive trading strategies, which contributes to the dividend capitalization effect.