VT Alaganar Graham Partington (Discipline of Finance, University of Sydney) Max Stevenson (Discipline of Finance, University of 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.
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Publisher Info
Paper provided by School of Finance and Economics, University of Technology, Sydney in its series Working Paper Series with number
92.
Find related papers by JEL classification: G12 - Financial Economics - - General Financial Markets - - - Asset Pricing G15 - Financial Economics - - General Financial Markets - - - International Financial Markets G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
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