This paper discusses the influences of the supplementary premiums of the Second-Generation National Health Insurance (NHI) program on the investment behavior of individual investors in the Taiwan stock market. The Second-Generation NHI program went into effect in 2013; thus, the researcher used the listed companies in Taiwan that distributed cash dividends from January 2012 to December 2013 as the research samples and applied the event study method for examining the influence of the Second-Generation NHI program on the investment behavior of individual investors in Taiwan. The empirical results are presented as follows. (1) According to a comparison of the dividend income earned by the individual investors in 2012 with that earned by the individual investors after the program was launched in 2013, abnormal returns received by the investors prior to the ex-dividend days in 2013 were significantly higher than those received in 2012, implying that the trade behavior of the individual investors were affected by the new policy. The research further involved comparing the stocks in the electronic and traditional sectors in 2012 with those in 2013. After the new policy was implemented, the average abnormal returns of the electronic sector after the ex-dividend days achieved a positive level of significance, and the abnormal returns of the traditional sector prior to the ex-dividend days were significantly positive. Implementing the program to collect supplementary premiums from dividend income affected stock prices before ex-dividend days. (2) This study used the stock turnover rate as the proxy variable for emotions of the individual investors and concluded that the stock turnover rates before and after the ex-dividend days in 2013 were significantly higher than those in 2012. Implementing the program prompted the individual investors to become emotionally agitated before and after the ex-dividend days in 2013. Moreover, the results of a comparison of the cash dividends in 2012 and 2013 imply that low cash dividends had significantly positive abnormal returns, which affected the emotions of individual investors, causing investment changes in the stock market.
