The value of imputation tax credits on Australian hybrid securities

Feuerherdt, Clinton, Gray, Stephen and Hall, Jason (2010) The value of imputation tax credits on Australian hybrid securities. International Review of Finance, 10 3: 365-401. doi:10.1111/j.1468-2443.2010.01117.x

Attached Files (Some files may be inaccessible until you login with your UQ eSpace credentials)
Name Description MIMEType Size Downloads
EC12UQ220022.pdf Full text - not publicly available application/pdf 330.32KB 3
UQ220022_HERDC_checklist.pdf UQ220022_HERDC_checklist.pdf application/pdf 47.29KB 0

Author Feuerherdt, Clinton
Gray, Stephen
Hall, Jason
Title The value of imputation tax credits on Australian hybrid securities
Journal name International Review of Finance   Check publisher's open access policy
ISSN 1369-412X
Publication date 2010-09
Year available 2010
Sub-type Article (original research)
DOI 10.1111/j.1468-2443.2010.01117.x
Volume 10
Issue 3
Start page 365
End page 401
Total pages 37
Editor Michael Lemmon
Sudipto Dasgupta
Place of publication Malden, MA, U.S.A.
Publisher Blackwell Publishing
Collection year 2011
Language eng
Subject 150201 Finance
910110 Taxation
Formatted abstract
Hybrid securities are becoming an increasingly important component of the capital structure of Australian firms. While displaying characteristics of both debt and equity, one principal equity attribute of hybrids is their ability to pay franked dividends. This enables resident domestic investors to claim corporate tax payments as a credit against personal tax obligations under Australia's dividend imputation tax system. This paper estimates a value for the ‘franking credits’ that attach to hybrid securities by examining stock price changes around ex-dividend dates. We add to the literature that examines the ex-day price changes of ordinary shares (OS) in that the hybrid securities we examine have high dividend yields and are relatively insensitive to market movements. Therefore the signal-to-noise ratio is much higher than for OS. Our analysis reveals that cum-dividend day prices on hybrid securities do not include any value for franking credits. This result is consistent with the notion that the price-setting investor in the Australian market is a foreign investor who places no value on franking credits.
© 2010 The Authors. International Review of Finance © International Review of Finance Ltd. 2010

Keyword Hybrid securities
Imputation tax credits
Franking credits
Australian share market
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Faculty of Business, Economics and Law -- Publications
Official 2011 Collection
UQ Business School Publications
Version Filter Type
Citation counts: Google Scholar Search Google Scholar
Created: Mon, 08 Nov 2010, 16:31:17 EST by Karen Morgan on behalf of UQ Business School