Dividend drop-off estimates of the value of dividend imputation tax credits

Damien Cannavan and Stephen Gray

Pacific-Basin Finance Journal, 2017, vol. 46, issue PB, 213-226

Abstract: The value of dividend imputation tax credits is the product of two components: the proportion of credits that are distributed to shareholders and the market value of those distributed credits. We employ a large sample and improved econometric techniques to estimate the value of both cash dividends and distributed imputation credits using dividend drop-off analysis. Our sample period begins in July 2000 to coincide with an important amendment to the dividend imputation legislation that allows residents to claim a cash rebate for excess credits, ends in June 2016, and covers 4690 ex-dividend events. Our results indicate that the market values distributed imputation credits at approximately 35% of the face amount.

Keywords: Dividend imputation; Ex-dividend day; Cost of capital (search for similar items in EconPapers)
JEL-codes: G31 G38 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:46:y:2017:i:pb:p:213-226

DOI: 10.1016/j.pacfin.2017.08.006

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