Institutional dividend clienteles under an imputation tax system

Aelee Jun, David R. Gallagher, Graham H. Partington*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

22 Citations (Scopus)


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.

Original languageEnglish
Pages (from-to)198-224
Number of pages27
JournalJournal of Business Finance and Accounting
Issue number1-2
Publication statusPublished - Jan 2011
Externally publishedYes


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