Do Ex-Dividend Drop-Offs Differ Across Markets? Evidence from Internationally Traded (ADR) Stocks

Alaganar Vt, Graham Partington and Max Stevenson
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Graham Partington: Discipline of Finance, University of Sydney
Max Stevenson: Discipline of Finance, University of Sydney

No 92, Working Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: This paper investigates whether the ex-dividend drop-offs for ADRs differ from the ex-dividend drop-offs of their underlying Australian stocks. An expected source of difference in the valuation of dividends, and hence in the drop-offs, is the availability of imputation tax credits to Australian resident investors. Valuation differences across markets present an arbitrage opportunity, but we hypothesize that transactions costs and risk will inhibit arbitrage and that the valuation difference will persist. Our results are consistent with this hypothesis. The ADRs have lower drop-offs and behave more like stocks taxed under a classical system than the underlying Australian stocks.

Keywords: ex-dividend; ADR; drop-off ratio; imputation tax; arbitrage (search for similar items in EconPapers)
JEL-codes: G12 G15 G35 (search for similar items in EconPapers)
Pages: 30 pages
Date: 1999-10-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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