Price and Volume Behavior Around the Ex-Dividend Day: Evidence on the Value of Dividends from American Depositary Receipts and Their Underlying Australian Stocks
35 Pages Posted: 30 May 2008
Abstract
Australian residents are tax-advantaged, relative to American investors, in their access to imputation tax credits on Australian stocks. This paper provides evidence consistent with a difference in dividend valuations between Australian stocks and their American Depositary Receipts (ADRs). The ex-dividend drop-off ratio is lower for ADRs relative to their underlying Australian stocks and this difference is most pronounced for stocks that have imputation tax credits and high dividend yields. Consistent with dividend capture trading in the Australian market, the difference in drop-off ratios is driven by both temporarily higher Australian cum-prices and temporarily lower Australian ex-prices. Abnormal trading volume about the ex-day is present in both markets and in the Australian market the abnormal volume is greater for dividends with imputation tax credits. Dividend-related trading leads to price differences across the markets on the ex-dividend day. Price differences are also observed when the stock and the ADR trade with different dividend entitlements due to different ex-dividend dates.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
By John R. Graham, Roni Michaely, ...
-
New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor
By Leonie Bell and Tim Jenkinson
-
By Roger H. Gordon and David F. Bradford
-
The Effective Tax Rate and the Pretax Rate of Return
By Martin S. Feldstein, James M. Poterba, ...
-
Taxes and Ex-Day Returns: Evidence from UK and Continental Europe
-
Taxation and the Ex-Dividend Day Behavior of Common Stock Prices
By Jerry Green
-
Marginal Stockholder Tax Effects and Ex-Dividend Day Behavior - Thirty-Two Years Later
By Edwin J. Elton, Martin J. Gruber, ...
-
Marginal Stockholder Tax Effects and Ex-Dividend Day Behavior-Thirty-Two Years Later
By Edwin J. Elton, Martin J. Gruber, ...