Stock Split Announcements Research Articles

Analisis Reaksi Pasar Atas Pengumuman Stock Split

This study reexamines market reaction on stock split announcement. The reexamination was triggered by the increase in the number of investors and occurrence of stock splits recently. The study was conducted in the Indonesia Stock Exchange with the number of samples taken using the non-participant observation method with a purposive sampling technique of 56 companies. Data was collected from the Indonesia Stock Exchange and Yahoo Finance websites. This study uses a 7-day event window. Expected return iscalculated by the market- adjusted model. The analysis technique used is one sample t-test on the cumulative abnormal return. Based on the results of the analysis it is found that there is a positive abnormal return around the announcement of stock split. It shows that stock split has information content.Keywords: Stock split, market reaction, abnormal return.

The Effects of Stock Split Announcements on the Stock Returns in Bursa Malaysia

This study investigated the presence of abnormal returns surrounding stock split announcements and the determinants of cumulative abnormal return and the split factor. This study utilized the financial data of 45 corporations that had exercised stock splits on Bursa Malaysia from the years 2011 to 2015. The dependent variables were cumulative abnormal return for 40 days, cumulative abnormal return for 60 days, and the split factor. The independent variables, dividends per share and earnings per share, represent the signalling hypothesis for the stocks in Malaysia, while the bid-ask spread and the trading volume represent the liquidity hypothesis and the market capitalization, respectively. The significance of abnormal returns surrounding stock split announcements was tested using standardized t-statistics. The determinants of cumulative abnormal return and the split factor were determined based on Ordinary Least-Squares (OLS) multivariate regression and Stepwise Least-Squares. The empirical results show that there was a statistically significant positive abnormal return on day 1 [+1] after the stock split announcements. Dividend per share was found to have a statistically significant relationship with the cumulative abnormal return; thus supporting the signalling hypothesis. Bid-ask spread and trading volume were the main determinants of cumulative abnormal return, supporting the liquidity hypothesis under a different estimation window. Bid-ask spread was the only important determinant for the split factor. The results of this study could help investors and policymakers to design policies to improve the overall market efficiency in Malaysia, particularly to increase the effectiveness of information disclosure regarding Malaysian stocks.

Stock Splits and Attracting Attention: Are Investors Buying Abnormally More Around Stock Split Announcements?

In this research I study whether stock splits attract market’s attention by exploring how investors are trading around event announcement dates. By employing high frequency intraday trading data from NYSE Trades and Quotes (TAQ) database I compute net abnormal buying around split announcements. The empirical tests on a matched pair sample of splitting and matching firms show that stock splits serve as attention attracting tool and investors are buying abnormally more around the announcements. Additional analysis confirms this finding – abnormal buying is significantly higher for larger splits. Furthermore, investors are more attracted to the splits that deliver higher subsequent long run stock performance.

Stock Split Announcements and Their Impact on Shareholders' Wealth : A Study on the Indian Stock Market

The study attempted to find out the impact of stock split on shareholders' wealth. The samples were selected from 500 companies of S&P BSE 500 index. The study analyzed the impact by taking the share prices of sampled companies for 30 days before and 30 days after the stock split announcements. The market adjusted model was used for calculating the abnormal returns. The statistical tools such as paired sample t - test and analysis of variance were used for analysis. The study concluded that stock split did not affect the share prices as per the theoretical point of view, but in reality, it affected the share prices and increased trading volumes after split. The study also concluded that stock split had an impact on shareholders' wealth, but this impact was not different according to the nature of the industry.

Analisis Perbedaan Bid Ask Spread dan Volatilitas Saham Sebelum dan Sesudah Pengumuman Stock Split

This study aimed to analyze the differences of bid ask spread and stock volatility before and after the announcement of stock split on companies listed in Indonesia Stock Exchange 2010-2013 period. The samples are 30 companies chosen by purposive sampling method. This study used event period 5 days before and 5 days after stock split with descriptive statistical analysis techniques, the normality test (one sample kolmogorov smirnov test), and hypothesis testing (wilcoxon signed ranks test). The results of the descriptive statistics indicate that the bid ask spread after announcement of stock split has decreased while increasing stock volatility than before announcement. However, the results of hypothesis testing with the wilcoxon signed ranks test showed that both the bid ask spreads and stock volatility is not significant difference between before and after announcement of stock split.

Analisis Abnormal Return Saham Sebelum dan Sesudah Reverse Stock Split pada Perusahaan di Bei Periode 2011-2015

A positive stock return causes investors interested and interested in investing in the company that issued the shares. Many companies do stock split to overcome the problem too low or too high stock prices. This study aims to analyze whether there are significant differences abnormal return of stock before and after conducted reverse stock split on company in BEI. The population in this study is the company that conducted reverse stock split in 2011 to 2015. Purposive sampling is the method used in sampling and obtained a number of 6 issuers meet the criteria of the sample. Tests in this study used the approach of event study and analytical techniques used to test bedaabnormal share return before and after reverse stock split is non-parametric test: wilcoxon signed rank test because the data is not normally distributed. The result obtained from this research is there is no significant difference of abnormal return of stock before and after announcement of reverse stock split. The result can be interpreted that the market does not respond to the stock split stocks. The stock split does not have information content and is not considered important information for investors.

CAPITAL MARKET REACTIONS TO THE ANNOUNCEMENT OF STOCK SPLIT (Studies on Go Public Compani that Perform A Stock Split Years 2011-2015 in The Indonesia Stock Exchange)

The purposes of this research is to investigate the market’s reaction events of the stock split announcement, proxied by abnormal returns and trading volumes. Hypothetical test in this research was using paired sample t test in the differences of abnormal return and wilcoxon signed rank to trading volume.Based on the results of hypothetical test, this research concluded that the market reacts negatively against the event of stock splits. The conclusion obtained from the presence of significant decrease of average volume of trade after the split event, where as the average of abnormal return decreases however not significant after the event of stock splits.

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

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.

Real determinants of stock split announcements

This paper examines the aggregate determinants of corporate events of stock splits. The evidence shows that good market conditions drive firms’ decisions to split shares and increase their associated returns, but the dominant effect of macroeconomic factors on stock split announcements is business cycle variations. Firms are most likely to split their shares when they have been experiencing enough excess earnings in economic upturns. This result is more consistent with the Neoclassical Efficiency Hypothesis. This research sheds light on the reasons why we observe corporate events happening in waves and enhance the understanding of why firms split shares at the aggregate level.

Analysis of Abnormal Return, Trading Volume, And Bid-Ask Spread At the Period of Stock Split Announcement

Analysis of Abnormal Return, Trading Volume, And Bid-Ask Spread At the Period of Stock Split Announcement

Informed Trading around Stock Split Announcements: Evidence from the Option Market

Prior research shows that splitting firms earn positive abnormal returns and that they experience an increase in stock return volatility. By examining option-implied volatility, we assess option traders’ perceptions on return and volatility changes arising from stock splits. We find that they do expect higher volatility following splits. There is only weak evidence, though, of option traders anticipating an abnormal increase in stock prices. We also show that our option measures can predict both stock volatility levels and changes after the announcement. However, there is little evidence that they can predict the returns of splitting firms.

Managerial Incentives for Attracting Attention

This paper studies the mechanisms which motivate and allow managers to engage in cheap talk and attract market’s attention in a credible way. We consider stock split announcements, voluntary earnings forecasts and press releases issued by firms to the media as proxies for managerial cheap talk. Using a sample of 3,332 US firms for the 1992-2011 period, we show that: (i) managerial performance-related pay contracts incentivize executives to attract attention; (ii) analysts increase their coverage of firms following the use of the aforementioned proxies of cheap talk; (iii) chief executive officers get punished for attracting attention when market prices do not increase following cheap talk.

The effect of market volatility and firm size towards the difference of market reaction around stock-split announcement in indonesia stock exchange

The primary objective of a company is to increase the wealth of the shareholders. Every decision, policies or actions must be made to favor the shareholders. Corporate actions are conducted by corporations to improve their performance or increase the wealth of the shareholder. Stock split is known as one of the several corporate measures that are perceived to be a positive corporate action. Stock split creates a perception that the stock is buyable and cheap without changing its initial value. It has already been studied that positive cumulative abnormal return occurs around the stock split. However, the truth is even though the stock split is considered positive, several companies do not experience the expected result. The results of stock splits vary and are perceived differently by investors. In this paper, researcher wants to study factors that can affect the difference in investors’ reaction towards the same corporate action, which is stock split. It is believed that market volatility can cause the difference in investors’ reaction towards the same positive corporate action (stock split) as studied before. The researcher also wants to study the relation between firm sizes represented by market capitalization that might cause investors to treat the same news differently. To analyze this, the researcher will first classify the stock split result in the form of Cumulative Abnormal Return (CAR) based on the volatility of the period that the stock split is conducted in and also the firm size that performs the stock split. The researcher will use one-way ANOVA to find out if there is a statistically significant difference in market reaction towards the stock-split event based on those two classifications. The researcher found that investors do react differently towards the stocksplit event in different market volatility conditions, and it is also found that there is no difference in investors’ reaction towards stock split based on firm size. The researcher also conducts further research and found that investors react differently in different market volatility condition in firms with small and medium market capitalization. While as in firms with large market capitalization, it is found that there is no statistically significant difference in investors’ reaction towards stock splits that are conducted in various market volatility conditions.

Analysts' Forecast Dispersion and Stock Split Announcements

This paper is an empirical investigation of the relation between the dispersion on analysts' earnings forecasts and the future performance following a change in the nominal price of shares. On a sample of US splits occurred from 1993 to 2013, we observe a change in the distribution of analysts' forecasts after the announcement of the event. In particular, we observe an increase in forecasts' dispersion. We distinguish the two components of private and common information, and we find that asymmetric information significantly increases after the announcement of stock splits, while no change is evinced in uncertainty. While we do not observe any relationship between dispersion and future returns in our sample of stocks, we shed light on the literature on disagreement observing a negative relation between asymmetric information and both future returns and cumulative abnormal returns post-split. We conclude observing that stock split have a stronger positive effect on future performance for shares with lower prior asymmetric information.

Impact of Stock Split Announcements on Stock Prices and Liquidity: Empirical Evidence from India

Impact of Stock Split Announcements on Stock Prices and Liquidity: Empirical Evidence from India

Stock Splits, Accounting Manipulation, and Unwarranted CEO Compensation

We investigate managerial opportunistic behavior and find that hundreds of firms use forward stock splits in conjunction with accruals management and real activities management to falsely signal bright prospects in schemes that help executives justify an average 34% increase in their salaries. While encouraging lay investors to buy the stocks with a stock split signal, insiders themselves reduce their own stakes, reflecting negative personal beliefs about firms’ prospects. Insider stock sales, accounting restatements, short CEO tenure, and reverse splits indicate the manipulative intent in these stock split announcements.

Another January effect—Evidence from stock split announcements

This paper examines whether there is a January effect in the propensity and abnormal returns of stock split announcements. It provides primary evidence in the investigation of using monthly effects to explain the patterns of stock splits. The results show that the January effect exists in the likelihood of the occurrence of share splits and in the associated short-term abnormal returns. We also find that another monthly effect—the Halloween effect—exists in stock split announcements. However, the January effect has a much larger and considerably more significant impact on the probability and returns of these announcements. The results of this paper shed light on why we observe patterns in the announcement of corporate events.

Impact of Corporate Event Announcements on Trends on Equities: Evidence from NSE Sectoral Indices

The objective of this study is to analyse the impact of corporate event announcements on share price and traded volume. Events like declaration of dividend, announcement of stock split, announcement of bonus share and announcement of right issue were considered for analysis. This study documented the evidence of impact on share price and traded volume by considering 731 events occurred in the group of companies representing 9 sectoral indices of National Stock Exchange (NSE) during the period 2009 to 2014. This study has adapted the concept of event study to calculate the abnormal average return on account of event announcements. The study found the significant positive impact on share price and the existence of abnormal average return on account of declaration of dividend and announcement of right issue. It also found the existence of positive significant impact on traded volume on account of the declaration of stock split and the announcement of right issue. The event like bonus issue gave a negative signal to the market which was supported by the negative abnormal average return during the post announcements.

ANALISIS KANDUNGAN INFORMASI DAN EFEK INTRA INDUSTRI PENGUMUMAN STOCK SPLIT YANG DILAKUKAN OLEH PERUSAHAAN BERTUMBUH DAN TIDAK BERTUMBUH

The objective of this research is to examine empirically about the information content and intra industry effect of stock split announcement. The analysis include three aspects: information content, risk (beta) and intra industry effect of stock split announcement by growth firm and not growth firm. The sample of this research is 79 reporter firm (consist of 59 growth firm and 20 not growth firm) and 166 non reporter firms during the period of 1997 – 2002. The result of this research show that stock split has information content which is negatively respondend and statistically significant responded by the market around the date of stock split announcement. The difference between beta growth firms and not growth firms after stock split announcement is significant. The intra industry effect of stock split announcement is competitive effect. Keywords: stock split, intra industry effect, competitive effect, information content

CEO opportunism?: Option grants and stock trades around stock splits

Decades of research confirm that, on average, stock split announcements generate positive abnormal returns. In our sample, 80% of CEO stock option grants are timed to occur on or before the split announcement date. With the average market-adjusted announcement return of 3.1%, awarding the grant before the split announcement results in an average gain per CEO-grant of $451,748. We find additional evidence consistent with timing of CEO stock trading around the split announcement. In the case of CEO stock sales, about two-thirds occur after the split announcement, resulting in an average gain of $345,613.