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The Ex-Dividend Day Behaviour of Australian Share Prices Before and After Dividend Imputation
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Philip Brown and Alex Clarke
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Abstract
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We document shifts in the ex-dividend day pricing of Australian shares that paid cash dividends between 1973 and 1991, and relate these shifts to three major changes in the taxation of capital gains, dividends and superannuation funds. Despite the changes, which on the whole increasingly favoured dividends over capital gains, shareholders have continued to prefer capital gains. One change was the introduction of dividend imputation in 1987. While the market took some time to adjust to dividend imputation, by 1990 shareholders typically obtained 80% of the benefits of the imputed tax credit.
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Keywords
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EX-DIVIDEND RETURN; DROP-OFF RATION; DIVIDEND IMPUTATION.
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Contact Details
Philip Brown
Department of Accounting and Finance
University of Western Australia
Nedlands WA 6009
Alex Clarke
Department of Accounting and Finance
University of Western Australia
Nedlands WA 6009
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Previous versions of this paper were presented at the 1989 Australian Banking and Finance Conference and the 1992 British Accounting Association Conference. We are indebted to our colleagues and participants in the Accounting and Finance Workshop, University of Western Australia, and to the referees.
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