The value of dividend imputation tax credits in Australia

Cannavan, Damien, Finn, Frank and Gray, Stephen (2004) The value of dividend imputation tax credits in Australia. Journal of Financial Economics, 73 1: 167-197. doi:10.1016/j.jfineco.2003.09.001

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Author Cannavan, Damien
Finn, Frank
Gray, Stephen
Title The value of dividend imputation tax credits in Australia
Journal name Journal of Financial Economics   Check publisher's open access policy
ISSN 0304-405X
Publication date 2004
Sub-type Article (original research)
DOI 10.1016/j.jfineco.2003.09.001
Volume 73
Issue 1
Start page 167
End page 197
Total pages 31
Editor G. W. Schwert
Place of publication Netherlands
Publisher Elsevier BV
Collection year 2004
Language eng
Subject C1
350301 Finance
350399 Banking, Finance and Investment not elsewhere classified
720106 Taxation
Abstract A dividend imputation tax system provides shareholders with a credit (for corporate tax paid) that can be used to offset personal tax on dividend income. This paper shows how to infer the value of imputation tax credits from the prices of derivative securities that are unique to Australian retail markets. We also test whether a tax law amendment that was designed to prevent the trading of imputation credits affected their economic value. Before the amendment, tax credits were worth up to 50% of face value in large, high-yielding companies, but Subsequently it is difficult to detect any value at all. (C) 2003 Elsevier B.V. All rights reserved.
Keyword Business, Finance
Economics
Dividend Imputation
Cost Of Capital
Stock-prices
Day Behavior
Q-Index Code C1

 
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Created: Wed, 15 Aug 2007, 03:16:53 EST