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Long-run Performance after Stock Splits: 1927 to 1996

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  • Jinho Byun

    (Ewha Women's University)

  • Michael S. Rozeff
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    Abstract

    We measure the postsplit performance of 12,747 stock splits from 1927 to 1996 using two methods to measure abnormal returns: size and book-to-market reference portfolios with bootstrapping, and calendar-time abnormal returns combined with factor models. Between 1927 and 1996, neither method applied to splits 25 percent or larger finds performance significantly different from zero. Over selected subperiods, subsamples of 2-1 splits restricted by book-to-market availability requirements display positive abnormal returns using some methods. However, these samples show small or negligible abnormal returns using the calendar-time method. Overall, the stock split evidence against market efficiency is neither pervasive nor compelling. Copyright 2003 by the American Finance Association.

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    Bibliographic Info

    Article provided by American Finance Association in its journal The Journal of Finance.

    Volume (Year): 58 (2003)
    Issue (Month): 3 (06)
    Pages: 1063-1086

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    Handle: RePEc:bla:jfinan:v:58:y:2003:i:3:p:1063-1086

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    Cited by:
    1. Chou, De-Wai & Liu, Yi & Zantout, Zaher, 2009. "Long-term stock performance following extraordinary and special cash dividends," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(1), pages 54-73, February.
    2. Chen, Honghui & Nguyen, Hoang Huy & Singal, Vijay, 2011. "The information content of stock splits," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2454-2467, September.
    3. Jegadeesh, Narasimhan & Karceski, Jason, 2009. "Long-run performance evaluation: Correlation and heteroskedasticity-consistent tests," Journal of Empirical Finance, Elsevier, vol. 16(1), pages 101-111, January.
    4. Danielova, Anna N. & Smart, Scott B. & Boquist, John, 2010. "What motivates exchangeable debt offerings?," Journal of Corporate Finance, Elsevier, vol. 16(2), pages 159-169, April.
    5. Cheng, Yingmei, 2005. "Post-listing underperformance: Is it really bad to move trading locations?," Journal of Corporate Finance, Elsevier, vol. 12(1), pages 97-120, December.
    6. Otchere, Isaac, 2005. "Do privatized banks in middle- and low-income countries perform better than rival banks? An intra-industry analysis of bank privatization," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2067-2093, August.
    7. Hwang, Soosung & Keswani, Aneel & Shackleton, Mark B., 2008. "Surprise vs anticipated information announcements: Are prices affected differently? An investigation in the context of stock splits," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 643-653, May.
    8. Chern, Keh-Yiing & Tandon, Kishore & Yu, Susana & Webb, Gwendolyn, 2008. "The information content of stock split announcements: Do options matter?," Journal of Banking & Finance, Elsevier, vol. 32(6), pages 930-946, June.

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