Dividend stripping in Germany: evidence from the futures market

Cum/Ex and Cum/Cum transactions have caused substantial tax revenue losses in Germany by exploiting the dividend withholding tax system. Legislative reforms in 2012 (OGAW IV), 2016 (§ 36a EStG), and 2018 (InvStRefG) aimed to eliminate these practices, yet concerns persist that modified variants may continue. This paper investigates whether these reforms effectively curtailed abusive dividend stripping by analyzing futures trading activity around 663 firm-specific ex-dividend dates of 47 HDAX companies over the period 2009–2023. Using relative abnormal open interest as a measure of trading activity and Driscoll–Kraay standard errors, the results show that each reform significantly reduced trading volume peaks around ex-dividend dates—by approximately 47% after OGAW IV, 63% after § 36a EStG, and 57% after InvStRefG. However, a statistically significant increase of about 94% in abnormal open interest persists in the post-reform period. To distinguish between legal dividend trading and potentially illegal modified Cum/Ex or Cum/Cum activity, the analysis is extended along two dimensions: a 45-day pre-ex-date window to capture strategies exploiting the minimum holding period, and a subsample split by profit margin. The extended window yields no significant results, and the residual trading activity is statistically equal across high- and low-profit margin stocks—inconsistent with the concentration in high-margin securities that illegal strategies would predict. These findings suggest that while the reforms substantially reduced abusive practices, the remaining trading activity is more likely attributable to conventional forms of dividend stripping than to continued illegal transactions.