Stock Split Announcement Effect on Stock Returns: Evidences from select Indian Companies

Abstract

Capital Markets is a market place for the common stocks. In general conditions the current market price in any financial market could be the best unbiased estimate of the value of the investments. Stock splits are one of the most popular method of rationalise the stock prices to a desired trading range when it becomes very costly and goes beyond buying capacity of the retail investor. And in general everyone will be interested to understand whether any abnormal returns are resulting the stock split announcement or not. The present study makes an attempt to find out the impact of the stock split announcement on shareholder returns with the sample firms of 49 companies belongs to six industries under Indian manufacturing sector. In the event study method, Market Model is adopted to find out the announcement effect on the returns on industry basis. The event window of 25 days (t-12 to t+12) been taken for the study and it reveals neither positive abnormal return nor negative abnormal return during the period of the study.