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Are imputation credits capitalised into stock prices?

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  • Kai-Wei (Shaun) Siau
  • Stephen J. Sault
  • Geoffrey J. Warren
  • Henk Berkman

Abstract

type="main" xml:id="acfi12058-abs-0001"> We investigate whether imputation tax credits are capitalised into Australian stock prices by utilising discounted cash-flow valuation models and examining the relation between earnings yields and imputation credit yields. While imputation credits are valuable to many investors, the evidence that they are reflected in share prices is at best mixed and largely unconvincing. Our results reveal that imputation credits fail to lower realised returns casting doubts over whether imputation credits are priced from the perspective of longer-term buy-and-hold investors. If so, such investors can expect to fully benefit from their imputation credits, and imputation effects may not impact on the cost of capital.

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  • Kai-Wei (Shaun) Siau & Stephen J. Sault & Geoffrey J. Warren & Henk Berkman, 2015. "Are imputation credits capitalised into stock prices?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 55(1), pages 241-277, March.
    • Handle: RePEc:bla:acctfi:v:55:y:2015:i:1:p:241-277
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    2. Anh Le & Xiangkang Yin & Jing Zhao, 2022. "The Capitalization Effect of Imputation Credits on Expected Stock Returns," Abacus, Accounting Foundation, University of Sydney, vol. 58(3), pages 523-566, September.
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    4. Hansi Hu & Terry Walter, 2023. "Dividend imputation taxes and the curious case of a price premium between BHP and Billiton American depositary receipts," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(1), pages 691-717, March.

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