Do stock splits matter for returns, volatility, and liquidity?

The purpose of this study is to investigate the impact of stock splits on the return, riskiness, and liquidity of stocks. Utilizing a sample of 94 stock splits taken place between 2010 and 2019 at Borsa Istanbul, the study analyzes the daily abnormal returns, change in volatility, and changes in volume around the stock split announcement and execution dates. The results display significant positive abnormal returns around the announcement date but not significant abnormal returns around the execution. The volatility and liquidity of stocks increase significantly around both announcement and execution dates. The findings are in line with the positive signaling, and liquidity hypotheses of stock split and with most of the observations reported in the empirical literature. The new evidence provided points out the lack of semi-strong form of market efficiency at Borsa Istanbul as far as the stock splits are considered.

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Normal and reverse stock splits in the V4 countries

Investment Management and Financial Innovations ◽

10.21511/imfi.13(4).2016.08 ◽

2016 ◽

Vol 13 (4) ◽

pp. 95-105 ◽

Cited By ~ 1

Author(s):

Manuela Raisová ◽

Martin Užik ◽

Christian M. Hoffmeister

Keyword(s):

Stock Returns ◽

Stock Prices ◽

Stock Price ◽

Abnormal Returns ◽

Stock Splits ◽

Announcement Date ◽

Reverse Stock Splits ◽

Stock Split ◽

Reverse Stock Split ◽

A Company

The economic crisis has forced managers of joint stock companies to look for short-term solutions for the sharp changes in stock prices of their companies. Even the companies of the V4 countries are not the exception. The authors have focused on those companies where have been used either reverse stock split or stock split. They analyzed the effects of the reverse stock split or stock splits on the abnormal returns of stocks. In this paper, the authors analyzed a dataset from 1993 until 2015 with 124 reverse stock splits and 184 stock splits in total focused on the stock market in V4. Based on their own research they conclude that when reverse stock splits were used stock returns significantly decreased one day around the announcement date. They conclude that managers of a company might use this instrument to move the stock price back to the optimal trading range outside of the penny stock area. In the case of stock splits, the authors concluded that the use of this tool results in a significant increase in the returns of a stock after the announcement date. However, the results are in contrast to some former studies which found no positive effect on the returns caused by stock splits. The authors conclude that managers of a company might use this instrument to transport information content of future (positive) performance of a company to the traders. Keywords: Vysegrad group countries, normal stock split, reverse stock split, abnormal returns. JEL Classification: G11, G23, G32

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Impact of splits on stock splits ratios around announcement day: empirical evidence from India

Investment Management and Financial Innovations ◽

10.21511/imfi.17(3).2020.26 ◽

2020 ◽

Vol 17 (3) ◽

pp. 345-359

Author(s):

Anjali Gupta ◽

Purushottam Kumar Arya

Keyword(s):

Stock Returns ◽

Stock Prices ◽

Positive Impact ◽

Abnormal Returns ◽

Stock Splits ◽

P Value ◽

Share Prices ◽

Stock Split ◽

Percentage Basis ◽

The Impact

Stock split should not have any impact on share prices, and there should be no value creation. The purpose of this study is to find any impact of stock splits announced in India between 1999 and 2019 on stock returns. The study aims to find differences in the impact of stock splits on stock returns with differences in stock split ratios. To examine the impact, the study includes 224 splits and adopts the standard event study methodology to find results. The presence of an abnormal return around split announcement day is the main factor, which determines the impact of stock split on the stocks. Average Abnormal Returns and Cumulative Average Abnormal Returns on percentage basis, z-test and p-value are used to statistically analyze the impact on stock prices around the announcement day of splits. These tests are used across different window periods (e.g., 20 days, 10 days and 5 days) around the event day (announcement day) to check if the impact of the event continues or decreases over time. The results point to a significant positive impact of stock splits on the returns of stock around the day the split was announced. The results also show that the impact is stronger for stock splits with ratios 10:1 (2.72 percent) and 10:2 (2.14 percent). It can be suggested that 10:1 and 10:2 are the most popular split ratios that receive maximum ongoing response to splits in the announcement window.

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AN ANALYSIS OF ABNORMAL RETURNS ASSOCIATED WITH STOCK SPLIT

The Singapore Economic Review ◽

10.1142/s0217590821500806 ◽

2021 ◽

pp. 1-14

Author(s):

JYOTI PANDEY ◽

VINAY KANDPAL ◽

NEERAJ NAUTIYAL

Keyword(s):

Stock Returns ◽

Stock Prices ◽

Stock Exchange ◽

Abnormal Returns ◽

Market Model ◽

Stock Splits ◽

Event Window ◽

Stock Split ◽

Secondary Information ◽

The Impact

A stock split is when a company’s outstanding shares are divided into multiple shares by issuing more shares to current shareholders without eroding their stake’s value. The company typically takes these actions to increase liquidity and marketability, lower stock prices, attract new investors and so on. The purpose of this study is to examine the impact of stock splits on the stock returns during the study period. Companies listed on the Bombay Stock Exchange (BSE) and those included in the S&P BSE 500 Index are included in the stock split data. The study period covers 14 years, between 2008 and 2021. Market model event study methodology is being employed to analyze the average abnormal returns (AARs), cumulative abnormal returns (CARs) and cumulative AAR (CAARs) using an event window period consisting of 31 days ([Formula: see text]). The study is largely based on secondary information from the CMIE Prowess IQ Database and the official BSE website. The [Formula: see text]-test, mean and standard deviation were used to investigate the influence of stock split announcements on share prices and the performance of stock splits before and after the announcement. The study found that on ([Formula: see text]), ([Formula: see text]), ([Formula: see text]) and ([Formula: see text]) and on the day of the announcement ([Formula: see text]), the market reacted favorably with significant positive abnormal returns. On ([Formula: see text]) and ([Formula: see text]) days, however, there were significant negative abnormal returns. The null hypothesis is accepted as the CAR for the whole 31-day event window, which is 0.0221, with a [Formula: see text]-statistic of 1.692, which is insignificant.

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STOCK MARKET REACTION TO BREXIT ANNOUNCEMENTS: EVIDENCE FROM A NATURAL EXPERIMENT

Global Economy Journal ◽

10.1142/s2194565919500180 ◽

2019 ◽

Vol 19 (03) ◽

pp. 1950018 ◽

Cited By ~ 1

Author(s):

JÚLIO LOBÃO ◽

SÍLVIA SANTOS

Keyword(s):

Stock Market ◽

Market Efficiency ◽

Stock Markets ◽

Natural Experiment ◽

Abnormal Returns ◽

Strong Form ◽

Trading Activity ◽

Stock Market Reaction ◽

Cumulative Abnormal Returns ◽

European Stock Markets

Using four Brexit-related announcements as a source of exogenous information shocks, we investigate the semi-strong form of efficiency in seven major European stock markets. Our results suggest that only the announcement of the Brexit referendum result produced statistically significant negative cumulative abnormal returns in the markets of the sample. However, with the exception of the Irish stock market, the effects ceased to be significant in a period of five trading sessions after the event. We also document an increase in trading activity, though statistically insignificant, in the day of the referendum and in the following days. Overall, our results are in line with the semi-strong form of market efficiency.

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Individual investor attention to stock split and the disposition effect

Review of Behavioral Finance ◽

10.1108/rbf-11-2020-0274 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Wendy Kesuma ◽

Irwan Adi Ekaputra ◽

Dony Abdul Chalid

Keyword(s):

Stock Returns ◽

Private Information ◽

Stock Exchange ◽

Stock Splits ◽

Disposition Effect ◽

Individual Investors ◽

Investor Attention ◽

Content Type ◽

Stock Split ◽

The Impact

PurposeThis paper investigates whether individual investors are attentive to stock splits and whether higher split ratios (stronger private information signals) reduce the disposition effect.Design/methodology/approachThis study employs stock split events and transaction data in the Indonesia Stock Exchange (IDX) from January 2004 to December 2017. The authors measure individual investors' attention using buy-initiated trades. To test the effect of split signal on disposition effect, the authors regress individual investors' sell-initiated trades on past stock returns.FindingsUnlike Birru (2015), the authors find that individual investors are attentive to stock splits, especially when stock split ratios are high. In turn, stock splits tend to weaken the disposition effect. The higher the stock split ratios, the weaker the disposition effect.Research limitations/implicationsThis study has a limitation in that the authors exclude all stock splits with dividend events around the split date. These stock splits cover 37% of all splits in Indonesia.Practical implicationsPractically, individual investors should look for stock-related information to reduce disposition bias.Originality/valueTo the best of authors’ knowledge, this study is the first to test individual investors' attention on stock splits based on their buy-initiated trades. This study is also the first to test the impact of stock split ratios on the disposition effect reduction. This study's findings enrich the scant literature on individual investors' attention and how to reduce their disposition effect bias.

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An Empirical Study of Stock Split Announcements of Select BSE Sectors Using Event Study Methodology

SDMIMD Journal of Management ◽

10.18311/sdmimd/2015/3960 ◽

2015 ◽

Vol 6 (1) ◽

pp. 1 ◽

Cited By ~ 1

Author(s):

Asha Nadig

Keyword(s):

Health Care ◽

Stock Market ◽

Event Study ◽

Abnormal Returns ◽

Market Model ◽

Stock Splits ◽

Consumer Durables ◽

Stock Market Reaction ◽

Stock Split ◽

Indian Stock Market

This study examines the stock market reaction to stock splits between 2002 and 2013 of 6 sectors of BSE-Auto, Bankex, Consumer Durables, FMCG, Health Care and IT sectors to find out if the Indian stock market is semi-strong efficient or not. The methodology used is event study under the market model. Samples of 14 stock splits are considered spread across 6 sectors. The results indicate that there are significant positive abnormal returns prior to split announcements. On the day of split announcement, 1 sector reacts positively (Health Care-3.3%) and the 5 react negatively (Auto -1%, Bankex -0.9%, CD -0.3%, FMCG -1%, and IT-1%). The results indicate that the null hypothesis, H01, that there is no significant AAR around the stock split announcement dates is accepted.

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Insider Trading Around Stock Split Announcements

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v16i3.2039 ◽

2011 ◽

Vol 16 (3) ◽

Cited By ~ 1

Author(s):

Yulong Ma ◽

Huey-Lian Sun ◽

Jasmine Yur-Austin

Keyword(s):

Information Content ◽

Insider Trading ◽

Abnormal Returns ◽

Portfolio Diversification ◽

Stock Splits ◽

Trading Behavior ◽

Corporate Insiders ◽

Stock Split ◽

Empirical Analyses

This research examines the trading behavior and motives of corporate insiders around announcements of firms' stock splits. Our empirical analyses document significant increases in insider sales prior to the announcement. Further, pre-announcement insider sales are found to be positively related to pre-announcement-period abnormal returns. These findings suggest that insider trading before stock split announcements is motivated mainly by portfolio diversification needs rather than by the information content of the announcements.

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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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Dividend Announcement and Ex-Dividend Effects on Stock Return

International Journal of Economics and Finance ◽

10.5539/ijef.v8n7p207 ◽

2016 ◽

Vol 8 (7) ◽

pp. 207

Author(s):

Dinh Bao Ngoc ◽

Nguyen Chi Cuong

Keyword(s):

Event Study ◽

Stock Price ◽

Stock Return ◽

Dividend Policy ◽

Abnormal Returns ◽

Listed Companies ◽

Announcement Date ◽

Study Methodology ◽

The Impact ◽

Event Study Methodology

We study the impact of dividend policy on the stock return by investigating reaction of the stock price on the dividend announcement date and the ex-dividend date. In order to achieve this goal, a sample comprising 1962 observations of dividend-related events from 432 listed companies in Vietnam during the period 2008 to 2015 is chosen to analyze and the event study methodology is used to estimate abnormal returns to the shares around the announcement date and the ex-dividend date. Our results clearly show that the effect of dividend announcement on the stock return is positive around the announcement date. In addition, the stock price moves up as long as the ex-dividend date approaches and then starts decreasing from this date onwards.

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Do Chinese Stock Markets React To The Newspaper Recommendations?

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v1i3.2983 ◽

2011 ◽

Vol 1 (3) ◽

Author(s):

Francis Cai ◽

Lianzan Xu ◽

C.K. Leung ◽

Huifang Cheng

Keyword(s):

Stock Prices ◽

Stock Markets ◽

Abnormal Returns ◽

Strong Form ◽

Market Model ◽

Delayed Response ◽

Chinese Business ◽

Study Methodology ◽

Chinese Stock Markets ◽

The Impact

This paper studies how the stock prices in Chinese stock markets react to the stock recommendations from a Chinese business newspaper Zhong Guo Zheng Quan Bao (China Security). Using event study methodology and market model as a benchmark, we calculate abnormal returns to ascertain the impact of published recommendations. We find that there are no statistically significant long-term abnormal returns associated with the published recommendations. However, there are profitable opportunities if investors act prior to the published recommendations. We also find that the recommendations from the newspaper causes a significant short term movement two days after the publication day, suggesting a delayed response from the investors who act on the recommendation. The delayed response shows the gradual dissemination of the information in Chinese stock markets. In summary, these results indicate that press recommendations of Chinese stocks contain no useful economic information for investors who act on the published recommendations. The possible abnormal returns for investors who buy the stocks before the recommendations are made public are evidence of a market that is strong-form inefficient and the delayed response from investors to the newspaper recommendations is most likely the evidence of a market that is semi-strong-form inefficient.

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