Market Arbitrage of Cash Dividends and Franking Credits

D. Beggs and C.L. Skeels

No 947, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: Since 1986 dividend imputation has influenced the ex-dividend day behaviour of Australian share prices. Between 1 April 1986 and 30 May 2004 the Government of the day introduced six major legislative amendments intent on improving the efficiency of the dividend imputation system. This paper explores the impact of dividend imputation, in its various forms, on ex-dividend share price adjustments. We find that only the most recent tax change, which provided full income rebates for unused franking credits, appears to have caused the market to put a statistically significant value on franking credits.

Keywords: Dividend imputation; cash dividends; franking credits; drop-off ratio; tax legislation; structural breaks. (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2005
New Economics Papers: this item is included in nep-acc and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Market Arbitrage of Cash Dividends and Franking Credits (2006)
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