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In this paper we find that the exchange rate exposure of individual firms increases with the return horizon. Also, the cross‐sectional differences in the magnitude of exposure of individual firms are significantly related to firm size but not to the relative portion of foreign sales to total sales. The empirical evidence is consistent with the hypothesis that hedging activities exhibit economies of scale, and, consequently, the magnitude of economic exposure is less for larger firms than for smaller firms.

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Based upon an examination of 987 ex-dividend events that took place on the Taiwan Stock Exchange between January 1992 and December 2006, we find that differential taxes are an important factor in terms of their effects on share prices and the behavior of investors around the ex-dividend day. Ex-day price drop ratio increases with the average investor's preference for dividend relative to capital gains. Excess volume around the ex-dividend day is positively correlated with the degree of tax heterogeneity and the gains from dividend-capturing activities, and is negatively associated with arbitrage risk and transaction costs. We also find that wealthy investors sell shares cum-dividend, subsequently reversing to buy shares on the ex-dividend day, whereas less wealthy investors, proprietary traders and corporate shareholders trade in the opposite direction.Overall, our results provide support for the dynamic dividend clientele hypothesis. JEL classification: G35

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