Cum-fake transactions in Scandinavian countries : an empirical study of ADRs from 2010 to 2019
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- Master Thesis 
In this thesis, we investigate cum-fake transactions in Scandinavian countries. The period of the study, covering nine years, is 2010-2019. Cum-fake trading has recently been in the media spotlight. Banks and brokers were abusing pre-released ADRs, and ultimately some of them were fined and sanctioned by the Securities and Exchange Commission. Cum-fake trading relies on a set of timed transactions around the ex-dividend day where the goal is to receive illegitimate dividend withholding tax credit for shares they do not possess and have not paid any taxes. We perform two main analyses of ADRs based on Scandinavian companies. Cum-fake trading would result in a high short volume close to dividend distribution. With this as a basis, we analyze short volumes—the second analysis uses bi-weekly short-interest volume. We also study abnormal volumes for Germany and Great Britain separately to supplement our main study on Scandinavian companies. By analyzing the trading volume around the dividend distribution, we find an increase in volume for Scandinavian companies, and even after the SEC sanctions. The SEC sanctions in 2016 do not seem to have any effect on the trading patterns.