The market value of cash dividends and imputation tax credits implied by option prices

Brown, David Ian. (2000). The market value of cash dividends and imputation tax credits implied by option prices Honours Thesis, School of Business, University of Queensland.

       
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Author Brown, David Ian.
Thesis Title The market value of cash dividends and imputation tax credits implied by option prices
School, Centre or Institute School of Business
Institution University of Queensland
Publication date 2000
Thesis type Honours Thesis
Total pages 112
Language eng
Subjects 1503 Business and Management
Formatted abstract The value of imputation credits to the marginal investor has a direct bearing on a firm's cost of equity capital. An understanding of the market's pricing process of imputation credits and cash dividends enables companies to determine the amount of income that needs to be distributed to investors to satisfy their return requirements. This thesis investigates the value of cash dividends and imputation credits that are implied by option prices. It is the first study to determine these values on a company by- company basis for a number of Australian firms. This paper shows that cash dividends are fully valued by investors, and imputation credits are positively valued but at a substantial discount to face value. The value of imputation credits declines following the recent introduction of tax laws that restrict their transfer. These results are consistent with a marginal shareholder of foreign origin who is unable to extract full benefit from the dividend package due to the operation of the imputation tax system.

 
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Created: Wed, 27 Oct 2010, 12:47:49 EST by Muhammad Noman Ali on behalf of The University of Queensland Library