The Market Reaction To Stock Splits — Evidence From India
AbstractStock splits are a relatively new phenomenon in the Indian context. This paper examines the market effect of stock splits on stock price, return, volatility, and trading volume around the split ex-dates for a sample of stock splits undertaken in the Indian stock market over the period 1999–2005.The traditional view of stock splits as cosmetic transactions that simply divide the same pie into more slices is inconsistent with the significant wealth effect associated with the announcement of a stock split. However, the empirical evidence confirms a negative effect on price and return of stock splits. The overall cumulative abnormal returns after the split are negative. These results suggest that stock splits have induced the market to revise its optimistic valuation about future firm performance, rejecting signaling hypothesis to which splits convey positive information to markets. Hence, stock splits have reduced the wealth of the shareholders. The results also show that presence of a positive effect on volatility and trading volume following the split events, thus suggesting that split events enhance liquidity.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.
Volume (Year): 10 (2007)
Issue (Month): 02 ()
Contact details of provider:
Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Polwat Lerskullawat, 2013. "Warrant Seos in an Emerging Market: Evidence from Thailand," Diversity, Technology, and Innovation for Operational Competitiveness: Proceedings of the 2013 International Conference on Technology Innovation and Industrial Management, ToKnowPress.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim).
If references are entirely missing, you can add them using this form.