Yagüe, José Gómez-Sala, J. Carlos Poveda-Fuentes, Francisco
Abstract
This study uses a sample of Spanish companies to examine the use of stock split announcements as signals of a firm's earnings performance. Our results confirm that, as in other stock markets, investors in the Spanish market upwardly revise share prices and financial analysts improve their earnings forecasts after stock split announcements. We also find that firms that announce a stock split show significantly better operating profitability in the years prior to the split than matching companies of the same size and industry; and that these relatively better profits are not the result of earnings management practices. Finally, our results suggest that only when the split factor is greater than expected will investors interpret splits as a signal of the permanent character of past earnings.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.