STOCK SPLIT AND STOCK MARKET REACTION: THE EVIDENCE OF INDONESIAN PUBLIC COMPANY

Abstract

Purpose of study: Go Public Company can raise funds for its operations through the sale of shares to investors. But if the stock price is too high, it can make the investors are not interested in buying stock. Stock market value can be reduced by the stock-split. This study aims to examine the effect of the stock split on abnormal return, stock price; trading volume and security return variability in the go public company on the Indonesia Stock Exchange.
 Methodology: Researchers use data from 41 companies that were taken by purposive sampling from 2013 to 2016. The hypotheses in this study were tested using a Paired sample t-test. 
 Result: The researcher found that the stock split event causes the difference between the stock price, trading volume and security return variability between before and after the stock split. But the results found that the stock split did not cause any differences between the abnormal return before and after the stock split. 
 Application: The results of this study can provide an overview of the relationship between stock split events with stock prices and stock trading volumes.
 Novelty/Originality of this study: This research using different methods compare with previous, namely multiple discriminant analysis. The multiple discriminant analysis methods are part of the discriminant analysis, which is a multivariate technique that includes the dependence method, namely the presence of variables.