Intra-industry reactions of stock split announcements
AbstractThis paper examines whether favorable information conveyed by stock split announcements transfers to non-splitting firms within the same industry. We find that there exists intra-industry reaction; shareholders of non-splitting firms experience significant positive abnormal returns during the stock split announcement period of their industry counterparts. In addition, we find that industry-wide (level of concentration) and firm-specific characteristics (degree of similarity with the splitting firm, level of asymmetric information, and mispricing) are important determinants in explaining the impact of the announcements on non-splitting firms. We further document an increase in earnings subsequent to the announcements which is associated to the stock price reactions. However, we find little evidence that there is a decline in earnings volatility and find no significant relation between change in earnings volatility and announcement period returns.
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Bibliographic InfoPaper provided by University of New Orleans, Department of Economics and Finance in its series Working Papers with number 1999-01.
Length: 31 pages
Date of creation: Jun 1999
Date of revision:
Stock market; Stock splits; Earnings volatility;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G39 - Financial Economics - - Corporate Finance and Governance - - - Other
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