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Taxes, International Clienteles and the Value of ADR Dividends

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  • Aelee Jun
  • Graham H. Partington

Abstract

An alternative approach to valuing dividends is developed and applied to American Depositary Receipts (ADRs) on Australian stocks. The values of ADR dividends are estimated from the period when, due to different ex-dividend dates, the ADRs and their underlying stocks trade with differential dividend entitlements. Australian ADR dividends are valued at less than their face value and the dividends on the underlying stocks are valued at more than their face value. This suggests that ADR dividends are priced by a clientele of US investors placing little value on the imputation tax credits attached to the dividends and that a clientele of Australian resident investors, who obtain value from imputation tax credits, price the dividends on the underlying stock.

Suggested Citation

  • Aelee Jun & Graham H. Partington, 2014. "Taxes, International Clienteles and the Value of ADR Dividends," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(9-10), pages 1337-1360, November.
    • Handle: RePEc:bla:jbfnac:v:41:y:2014:i:9-10:p:1337-1360
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    References listed on IDEAS

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    Cited by:

    1. Cannavan, Damien & Gray, Stephen, 2017. "Dividend drop-off estimates of the value of dividend imputation tax credits," Pacific-Basin Finance Journal, Elsevier, vol. 46(PB), pages 213-226.
    2. Damien Cannavan & Stephen Gray & Jason Hall, 2023. "Sampling error and the joint estimation of imputation credit value and cash dividend value," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1029-1068, April.
    3. Hansi Hu & Terry Walter, 2023. "Dividend imputation taxes and the curious case of a price premium between BHP and Billiton American depositary receipts," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(1), pages 691-717, March.

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