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Are imputation credits capitalised into stock prices?
Author(s) -
Siau KaiWei Shaun,
Sault Stephen J.,
Warren Geoffrey J.
Publication year - 2015
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12058
Subject(s) - imputation (statistics) , valuation (finance) , cash flow , stock (firearms) , earnings , economics , econometrics , business , financial economics , monetary economics , finance , computer science , missing data , mechanical engineering , machine learning , engineering
Abstract We investigate whether imputation tax credits are capitalised into A ustralian 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.