Insider Ownership and Dividend Policy in an Imputation Tax Environment

42 Pages Posted: 14 Jan 2010 Last revised: 17 Mar 2017

See all articles by Balasingham Balachandran

Balasingham Balachandran

La Trobe University - School of Economics and Finance; Financial Research Network (FIRN)

Arifur Rahman Khan

School of Accounting, Economics and Finance, Deakin University

Paul R. Mather

La Trobe University

Michael Theobald

University of Birmingham - Department of Accounting and Finance

Date Written: January 29, 2017

Abstract

Firms are more likely to pay dividends with higher payout ratios in an imputation environment. The effects of profitability and earned/contributed capital mix on the decision to pay dividends and dividend payout are weaker for firms following imputation tax system than traditional tax system. Insider ownership is positively related to the decision to pay dividends and dividend payout and this effect does not vary between traditional and imputation tax systems. Firms with higher foreign institutional ownership are less likely to pay dividends and have lower payout ratios. The study demonstrates the significance of the imputation tax system upon dividend policy.

Keywords: agency costs; Insider ownership; imputation tax system; franked dividend, unfranked dividend; institutional ownership

JEL Classification: G14, G35

Suggested Citation

Balachandran, Balasingham and Khan, Arifur Rahman and Mather, Paul R. and Theobald, Michael F., Insider Ownership and Dividend Policy in an Imputation Tax Environment (January 29, 2017). Journal of Corporate Finance, Forthcoming, DOI: 10.1016/j.jcorpfin.2017.01.014; Finance and Corporate Governance Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1534053 or http://dx.doi.org/10.2139/ssrn.1534053

Balasingham Balachandran

La Trobe University - School of Economics and Finance ( email )

La Trobe University
Bundoora, Vic, 3086
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Arifur Rahman Khan

School of Accounting, Economics and Finance, Deakin University ( email )

75 Pigdons Road
Victoria, Victoria 3216
Australia

Paul R. Mather

La Trobe University ( email )

School of Accounting
Bundoora
Melbourne, Victoria 3086
Australia
+61-3-9479-5264 (Phone)

Michael F. Theobald (Contact Author)

University of Birmingham - Department of Accounting and Finance ( email )

Birmingham B15 2TT
United Kingdom
0121 414 6678 (Fax)

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