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Institutional Dividend Clienteles Under an Imputation Tax System
Author(s) -
Jun Aelee,
Gallagher David R.,
Partington Graham H.
Publication year - 2010
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2010.02214.x
Subject(s) - dividend , dividend yield , dividend policy , imputation (statistics) , equity (law) , business , monetary economics , dividend tax , institutional investor , economics , financial economics , tax reform , finance , corporate governance , public economics , state income tax , missing data , machine learning , computer science , political science , law , gross income
Shareholdings for a sample of institutional equity funds, operating under the Australian imputation tax system, show that dividend policy and fund holdings are related. Relative to market benchmarks and ownership levels across firms, institutional funds are overweight in stocks that pay dividends. Among dividend‐paying stocks there is no simple preference for high dividend yields, probably because the highest dividend yields are not sustainable. Instead we find an inverted U relationship between institutional ownership and dividend yield. The tax hypothesis dominates the prudent‐man hypothesis in explaining ownership by institutional clienteles. Institutional funds have a higher ownership in stocks which carry full imputation tax credits compared to stocks which have partial, or zero, imputation tax credits.