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A key question in asset pricing is the extent to which tax effects are passed through market prices or are capitalised in them. New Zealand stock dividends provide a useful window into this debate because of (1) the existence of both taxable and non-taxable stock dividends, and (2) the particular form of imputation tax system which allows the full pass through of corporate taxes to the investor on the proportion of profits which are distributed either as cash or taxable stock dividends. We present evidence that investors value future tax benefits associated with imputation tax credits. Copyright Blackwell Publishers Ltd 2001.

We extend Byoun's (2008) modelling of the relationship between deficits and surpluses and adjustment speed, to demonstrate how industry characteristics identified by Kayo and Kimura (2011), including industry concentration, industry munificence and industry dynamism, impact on speed of adjustment. Using New Zealand firms as a case study, we find significant evidence that, as well as firm financial position, industry characteristics also impact on adjustment speed. The firm financial position results are the most robust, and we recommend further research to confirm the nature of the relationship between industry characteristics and the speed at which firms adjust towards target capital structures.