Corporate actions and the manipulation of retail investors in China: An analysis of stock splits

Editor's note: The Dow Jones Industrial Average is found by adding the prices of thirty stocks and dividing the sum by a divisor. The divisor is found through a somewhat complex formula and is used to ensure the continuity of the averages after corporate actions such as spin–offs and stock splits. As a result, the divisor is no longer equal to the number of stocks in the average, as might be expected.

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Stock Price Manipulation: Corporate Actions and the Exploitation of Retail Investors in China

SSRN Electronic Journal ◽

10.2139/ssrn.3569429 ◽

2020 ◽

Author(s):

Sheridan Titman ◽

Chishen Wei ◽

Bin Zhao

Keyword(s):

Stock Price ◽

Price Manipulation ◽

Retail Investors ◽

Corporate Actions

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The Impact of Stock Dividends and Stock Splits on Shares’ Prices: Evidence from Egypt

Accounting and Finance Research ◽

10.5430/afr.v6n4p96 ◽

2017 ◽

Vol 6 (4) ◽

pp. 96 ◽

Cited By ~ 2

Author(s):

Osama Abd ElKhalek El Ansary ◽

Mervat Hussien El-Azab

Keyword(s):

Stock Prices ◽

Positive Impact ◽

Stock Exchange ◽

Investment Decision ◽

Price Volatility ◽

Stock Splits ◽

Stock Split ◽

Corporate Actions ◽

Stock Dividends ◽

The Impact

This research aims to examine the effect of two types of corporate actions,“Stock Split” and “Stock Dividends”, on the shares’ prices, liquidity changes, and price volatility; and to investigate the efficiency of the Egyptian stock market in response to the announcement of the corporate actions. The research provides the investors with a scientific tool to predict and explain changes in stock prices in response to announced corporate actions and to improve their investment decision-making process.The objective is to investigate whether the two actions collectively or independently have a positive impact on the prices of the related stocks listed on the Egyptian Stock Exchange (EGX), and assess the similarities and dissimilarities between their individual impacts.We applied the “Event Study” approach to measure the impact of the stock splits and stock dividends announcement on the stock prices through measuring the cumulated average abnormal return (CAAR) resulted from events to assess their impact on the stock performance around the announcement day (for a period of 30 prior and 30 days post announcement) as applied before by Terhi (2011). The analysis concluded that the announcement of both of stock split and stock dividend has a positive impact on stock prices. This positive impact drove the authors to test the efficiency of EGX in respect of the impact of the announcement the corporate actions to the public investors. A correlation analysis is performed to reflect this impact.

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Analisis Pengaruh Stock Split Terhadap Harga Saham, Abnormal Return Dan Risiko Sistematik Saham Perusahaan (Studi Pada Perusahaan Yang Terdaftar Di Bei 2016-2018)

EKONIKA Jurnal Ekonomi Universitas Kadiri ◽

10.30737/ekonika.v4i1.335 ◽

2019 ◽

Vol 4 (1) ◽

pp. 95

Author(s):

Nindi Vaulia Puspita ◽

Kartika Yuliari

Keyword(s):

Stock Prices ◽

Stock Price ◽

Abnormal Return ◽

Systematic Risk ◽

Stock Splits ◽

Reverse Stock Splits ◽

Stock Split ◽

Before And After ◽

Reverse Stock Split ◽

Corporate Actions

The purpose of this study is to analyze the effect of stock split on stock price, abnormal return and systematic risk of stock, The sample in this study as many as 82 companies are doing stock splits in the period 2016-2018 with the requirement that no other corporate actions such as mergers and acquisitions or reverse stock splits. The result indicated there are differences in stock prices and abnormal return before and after the stock split event, and the systematic risk no difference after and before the stock split event. This condition because of the strong internal factors of the company, this is indicated by no effect of systematic risk (beta) on stocks due to unstable market because investors buy stocks in the short term so they are not affected by systematic risk. Penelitian bertujuan untuk melakukan analisis pengaruh stock split terhadap harga saham, abnormal return dan risiko sistematik saham, sampel penelitian terdiri dari 82 perusahaan yang melakukan stock split dalam rentang waktu 2016-2018 dengan persyaratan tidak ada corporate action yang lain seperti merger dan akuisisi ataupun reverse stock split. Hasil penelitian menunjukkan terdapat perbedaan harga saham sebelum dan sesudah peristiwa stock split, adanya perbedaan abnormal return sebelum dan sesudah stock split dan yang terakhir risiko sistematik menghasilkan tidak adanya perbedaan setelah dan sebelum adanya peristiwa stock split, kondisi ini karena kuatnya factor internal perusahaan, hal ini ditunjukkan dengan tidak adanya pengaruh risiko sistematik (beta) terhadap saham yang disebabkan kondisi pasar yang tidak stabil menyebabkan investor membeli saham dengan tujuan jangka pendek sehingga tidak terpengaruh dengan risiko sistematik.

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PERUBAHAN TINGKAT LIKUIDITAS SAHAM DAN ABNORMAL RETURN YANG DIPENGARUHI OLEH PERISTIWA PEMECAHAN SAHAM

JURNAL AKUNTANSI ◽

10.37932/ja.v8i2.73 ◽

2020 ◽

Vol 8 (2) ◽

pp. 135-145

Author(s):

Achmad Yusup Sulaiman ◽

Hidayat Darwis

Keyword(s):

Stock Returns ◽

Abnormal Return ◽

Stock Splits ◽

Stock Liquidity ◽

Purposive Sampling ◽

Stock Split ◽

Before And After ◽

Sample Technique ◽

Abnormal Stock Returns ◽

Corporate Actions

This study was conducted to determine the significance of changes in stock liquidity and abnormal stock returns before and after the stock split. The sample technique used in this study was purposive sampling and the criteria used included the issuer not taking other corporate actions at the same time as the stock split. The samples used in this study were 28 companies. The results of this study indicate that stock split events have a significant effect on the level of stock liquidity. Whereas for abnormal stock returns, stock splits do not affect the overall meaning, stock splits do not affect the level of abnormal stock returns

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Dilemma of Corporate Action: Empirical Evidences of Bonus Issue vs. Stock Split

Vikalpa The Journal for Decision Makers ◽

10.1177/0256090920080303 ◽

2008 ◽

Vol 33 (3) ◽

pp. 35-48 ◽

Cited By ~ 2

Author(s):

Srinivas Shirur

Keyword(s):

Market Efficiency ◽

Policy Implications ◽

Share Price ◽

Stock Splits ◽

Rate Of Growth ◽

Corporate Action ◽

Significant Difference ◽

Stock Split ◽

Corporate Actions ◽

Efficiency Hypothesis

Corporate action is usually believed to offer some good news to the investors, particularly in case of amalgamation and mergers. In many cases, corporate actions do not involve any potential future positive benefits to the company as is the case with bonus issue and stock splits. Such types of actions of the companies could be called as fictitious corporate actions. It has been noticed by many empirical studies that the market react positively to the announcement of bonus shares and stock splits. This study analyses the reasons for the issue of bonus shares and stock splits on a sample of 165 companies which have issued bonus shares and 134 companies which have gone for stock splits during January 2000 to September 2006. An effort is also made to find the distinguishing conditions under which a company has to decide whether to issue bonus shares or to go for stock splits. Five variables have been considered for the study: rate of growth of sales and profit, beta and share price increase, and promoter stake. Effort has been made to explore whether there is any significant difference in these variables as applicable to stock split and bonus shares. The study reveals that top management of the companies decide to issue bonus shares when the investors undervalue the company while they go for stock split when the investors overvalue the company for a long time and promoters have to step in to correct these anomalies. This merely goes on to prove that capital markets are not inherently efficient even in the long run and promoters have to intervene to manage the prices of their stocks through corporate actions. This puts a question mark on the Market Efficiency Hypothesis and an effort has been made to test the ability of NSE to depict semi-strong and strong form of Market Efficiency Hypothesis. As far as policy implications are concerned, the author suggests that: Companies may resort to bonus shares issue if the rate of growth of share price lag behind the market index and the rate of growth of sales and profit is higher than the companies included in the index. In contrast, they may resort to stock split if the rate of growth of share price is higher than that of the index while the growth in sales and profit is less than the companies included in the index. One should also be cautious while applying this rationale. There are significant number of companies (negative companies) which may resort to fictitious corporate actions even if their rate of growth of sales or profit or both are negative in order to mislead the investors by resorting to false signaling.

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