Stock splits: motivations and valuation effects in the Spanish market
AbstractThis study analyzes the motivations and valuation effects of stock splits in a "medium-sized market" such as the Spanish market. Our findings suggest that splitting firms present a pre-split stock price above the normal trading range, and that, after the split, the number of transactions and the average transaction size increase significantly. Moreover, positive abnormal returns are observed around announcement dates and around the ex-date. For the latter, however, these positive wealth effects are outweighed by the negative abnormal returns observed closely afterwards. Our findings suggest that the liquidity, or optimal trading range hypothesis, prevails over other hypotheses as an explanation for stock splits in the Spanish market. (Copyright: Fundación SEPI)
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Bibliographic InfoArticle provided by Fundación SEPI in its journal Investigaciones Economicas.
Volume (Year): 27 (2003)
Issue (Month): 3 (September)
Contact details of provider:
Postal: Investigaciones Economicas Fundación SEPI Quintana, 2 (planta 3) 28008 Madrid Spain
Web page: http://www.fundacionsepi.es/
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
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