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Insider Ownership and Signals: Evidence from Stock Split Announcement Effects

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  • Han, Ki C
  • Suk, David Y

Abstract

This study examines whether investors regard the level of insider ownership of a firm as useful for evaluating stock split decisions. Results show that the abnormal returns at the announcement of stock splits are positively related to the level of insider ownership. The results prevail even after controlling for other relevant factors. Further analysis indicates the positive relation exists for small firms, but not for large firms. This indicates the market evaluates stock split decisions within the context of both insider ownership and information asymmetry. Copyright 1998 by MIT Press.

Suggested Citation

  • Han, Ki C & Suk, David Y, 1998. "Insider Ownership and Signals: Evidence from Stock Split Announcement Effects," The Financial Review, Eastern Finance Association, vol. 33(2), pages 1-18, May.
    • Handle: RePEc:bla:finrev:v:33:y:1998:i:2:p:1-18
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    Cited by:

    1. Showkat Ahmad Busru & G. Shanmugasundaram & Shariq Ahmad Bhat, 2020. "Corporate Governance an Imperative for Stakeholders Protection: Evidence from Risk Management of Indian Listed Firms," Business Perspectives and Research, , vol. 8(2), pages 89-116, July.
    2. Nguyen, Vinh & Tran, Anh & Zeckhauser, Richard, 2017. "Stock splits to profit insider trading: Lessons from an emerging market," Journal of International Money and Finance, Elsevier, vol. 74(C), pages 69-87.
    3. Gorkittisunthorn, Maneeporn & Jumreornvong, Seksak & Limpaphayom, Piman, 2006. "Insider ownership, bid-ask spread, and stock splits: Evidence from the Stock Exchange of Thailand," International Review of Financial Analysis, Elsevier, vol. 15(4-5), pages 450-461.
    4. Robert M Hull & JuliAnn Mazachek, 2001. "Junior‐for‐senior announcements," Review of Financial Economics, John Wiley & Sons, vol. 10(3), pages 213-225.
    5. Robert Hull & Sungkyu Kwak & Rosemary Walker, 2012. "Explanation for market response to seasoned equity offerings," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 36(3), pages 634-661, July.
    6. Nguyen Kim Quoc Trung, 2021. "The relationship between internal control and credit risk – The case of commercial banks in Vietnam," Cogent Business & Management, Taylor & Francis Journals, vol. 8(1), pages 1908760-190, January.
    7. Yi‐Hui Tai & Nen‐Chen Richard Hwang, 2020. "Market Reactions to Corporate Governance Ranking Announcements: Evidence from Taiwan," Abacus, Accounting Foundation, University of Sydney, vol. 56(4), pages 627-648, December.
    8. Ranjan D'Mello & Oranee Tawatnuntachai & Devrim Yaman, 2003. "Why Do Firms Issue Equity after Splitting Stocks?," The Financial Review, Eastern Finance Association, vol. 38(3), pages 323-350, August.

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