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Taxes, International Clienteles and the Value of ADR Dividends
Author(s) -
Jun Aelee,
Partington Graham H.
Publication year - 2014
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/jbfa.12088
Subject(s) - dividend , financial economics , dividend policy , value (mathematics) , economics , business , face value , stock (firearms) , dividend tax , imputation (statistics) , monetary economics , finance , tax reform , market economy , machine learning , computer science , missing data , mechanical engineering , gross income , engineering , state income tax
An alternative approach to valuing dividends is developed and applied to American Depositary Receipts (ADRs) on Australian stocks. The values of ADR dividends are estimated from the period when, due to different ex‐dividend dates, the ADRs and their underlying stocks trade with differential dividend entitlements. Australian ADR dividends are valued at less than their face value and the dividends on the underlying stocks are valued at more than their face value. This suggests that ADR dividends are priced by a clientele of US investors placing little value on the imputation tax credits attached to the dividends and that a clientele of Australian resident investors, who obtain value from imputation tax credits, price the dividends on the underlying stock.