Do Ex-Dividend Drop-Offs Differ Across Markets? Evidence from Internationally Traded (ADR) Stocks
AbstractThis 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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Bibliographic InfoPaper provided by Finance Discipline Group, UTS Business School, University of Technology, Sydney in its series Working Paper Series with number 92.
Date of creation: 01 Oct 1999
Date of revision:
ex-dividend; ADR; drop-off ratio; imputation tax; arbitrage;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
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