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

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  • Cannavan, Damien
  • Gray, Stephen

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.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:pacfin:v:46:y:2017:i:pb:p:213-226
    DOI: 10.1016/j.pacfin.2017.08.006
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    More about this item

    Keywords

    Dividend imputation; Ex-dividend day; Cost of capital;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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