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

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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 environment. The daily share return behaviour indicated that the announcement to introduce DRP was received indifferntly by the market prior to the imputation, but was valued positively afterwards. The results support the suggestion that under imputation the optimal dividend policy is to distribute the maximum franked dividend and implement a DRP to retain cashflows.

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File URL: http://www.finance.uts.edu.au/research/wpapers/wp16.pdf
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Bibliographic Info

Paper provided by Finance Discipline Group, UTS Business School, University of Technology, Sydney in its series Working Paper Series with number 16.

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Length: 20 pages
Date of creation: 01 Apr 1992
Date of revision:
Publication status: Published as: Chan, K. K.W.,McColough, D. M. and Skully, M. T. 1993, "Australian Tax Changes and Dividend Reinvestment Announcement Effects: A Pre- and Post-Imputation Study", Australian Journal of Management, 18(1), 41-62.
Handle: RePEc:uts:wpaper:16

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  1. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
  2. N. A. Sinclair, 1981. "An Empirical Examination of the Required Number of Leading and Lagged Variables for ACM Beta Estimation," Australian Journal of Management, Australian School of Business, vol. 6(2), pages 119-126, December.
  3. Peterson, Pamela P & Peterson, David R & Moore, Norman H, 1987. "The Adoption of New-Issue Dividend Reinvestment Plans and Shareholder Wealth," The Financial Review, Eastern Finance Association, vol. 22(2), pages 221-32, May.
  4. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411.
  5. Dodd, Peter & Warner, Jerold B., 1983. "On corporate governance : A study of proxy contests," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 401-438, April.
  6. Brickley, James A., 1986. "Interpreting Common Stock Returns around Proxy Statement Disclosures and Annual Shareholder Meetings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(03), pages 343-349, September.
  7. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
  8. Dimson, Elroy, 1979. "Risk measurement when shares are subject to infrequent trading," Journal of Financial Economics, Elsevier, vol. 7(2), pages 197-226, June.
  9. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
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Cited by:
  1. M. Ameziane Lasfer, 1997. "On the Motivation for Paying Scrip Dividends," Financial Management, Financial Management Association, vol. 26(1), Spring.
  2. 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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