Canada's Interconvertible Shares: A Puzzle

Warren Bailey

University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA

Abstract: Passage of the Canada Income Tax Act of 1971 permitted Canadian corporations to issue two classes of equity, one paying ordinary cash income and the other paying capital gains income. The shares are known as "interconvertible" because each share is freely convertible one-for-one into a share of the other type. Premiums paid for cash shares are consistent with the relative value of the dividends paid and with the taxation of certain investor groups. However, large premiums for some cash shares are evidence that the shares have been mispriced with respect to the conversion option.

Date: 1994-01-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.escholarship.org/uc/item/10718328.pdf;origin=repeccitec (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:anderf:qt10718328

Access Statistics for this paper

More papers in University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().