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Australian Tax Changes and Dividend Reinvestment Announcement Effects: A Pre- and Post-Imputation Study

Author

Listed:
  • Keith K.W. Chan

    (School of Finance and Economics, University of Technology, Sydney, PO Box 123, Broadway NSW 2007.)

  • Damien W. McColough

    (School of Banking and Finance, University of New South Wales, PO Box 1, Kensington NSW 2033.)

  • Michael T. Skully

    (School of Banking and Finance, Monash University, PO Box 197, Caulfield East VIC 3145.)

Abstract

This paper used an event study approach to examine the impact of dividend reinvestment plans on shareholders' returns in the pre- and post-imputation environments. The daily share return behaviour indicated that the announcement to introduce a dividend reinvestment plan (DRP) was received indifferently by the market before 1 July 1988, but was valued positively after superannuation funds were able to benefit from the imputation credits. Moreover, the simple market-adjusted returns model and the market model had similar power in detecting abnormal returns in an Australian context.

Suggested Citation

  • Keith K.W. Chan & Damien W. McColough & Michael T. Skully, 1993. "Australian Tax Changes and Dividend Reinvestment Announcement Effects: A Pre- and Post-Imputation Study," Australian Journal of Management, Australian School of Business, vol. 18(1), pages 41-62, June.
    • Handle: RePEc:sae:ausman:v:18:y:1993:i:1:p:41-62
    DOI: 10.1177/031289629301800102
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    References listed on IDEAS

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    Cited by:

    1. Nicholas Pricha & Sean Foley & Graham Partington & Jiri Svec, 2016. "Underwritten Dividend Reinvestment Plans and Conflicts of Interest," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 43(9-10), pages 1361-1384, October.
    2. Robert E.G. Nigol, 1992. "The Dividend Puzzle: An Australian Solution?," Australian Accounting Review, CPA Australia, vol. 1(4), pages 42-55, November.
    3. Hussein Abedi Shamsabadi & Byung-Seong Min & Richard Chung, 2016. "Corporate governance and dividend strategy: lessons from Australia," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 12(5), pages 583-610, October.
    4. Chan, Keith K. W. & McColough, Damien W. & Skully, Michael T., 1995. "Dividend reinvestment plans in australia," Global Finance Journal, Elsevier, vol. 6(1), pages 79-99.
    5. Robert Faff & David Hillier & Justin Wood, 2000. "Beta and Return: Implications of Australia's Dividend Imputation Tax System," Australian Journal of Management, Australian School of Business, vol. 25(3), pages 245-260, December.
    6. Abraham, Mathew & Marsden, Alastair & Poskitt, Russell, 2015. "Determinants of a firm's decision to utilize a dividend reinvestment plan and shareholder participation rates: Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 31(C), pages 57-77.
    7. M. Ameziane Lasfer, 1997. "On the Motivation for Paying Scrip Dividends," Financial Management, Financial Management Association, vol. 26(1), Spring.
    8. Sophie Manigart & Koen De Waele, 1999. "Choice dividends and contemporaneous earnings announcements on a small stock market: an empirical study," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 161, pages 27-56.

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