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The Information Content of Multiple Stock Splits

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  • Gow‐Cheng Huang
  • Kartono Liano
  • Herman Manakyan
  • Ming‐Shiun Pan

Abstract

We examine the relationship between the frequency of stock splits and firms' motives for splitting their stock. Compared to their peers, infrequent splitters show higher post‐split operating performance, but not so for frequent splitters. We find that split ratio and liquidity change explain the stock split announcement effect for the frequent splitters. In contrast, the change in operating performance in the split year explains the announcement effect for the infrequent splitters. Our results suggest that frequent splits are more consistent with the trading range‐improved/liquidity hypothesis and infrequent splits are more consistent with the signaling hypothesis.

Suggested Citation

  • Gow‐Cheng Huang & Kartono Liano & Herman Manakyan & Ming‐Shiun Pan, 2008. "The Information Content of Multiple Stock Splits," The Financial Review, Eastern Finance Association, vol. 43(4), pages 543-567, November.
    • Handle: RePEc:bla:finrev:v:43:y:2008:i:4:p:543-567
    DOI: 10.1111/j.1540-6288.2008.00205.x
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    Cited by:

    1. Khamis H. Al-Yahyaee, 2014. "Frequency and Motives for Stock Dividends in a Unique Environment," International Review of Finance, International Review of Finance Ltd., vol. 14(2), pages 295-318, June.
    2. Walker, Scott, 2021. "Post-split underreaction: The importance of prior split history," International Review of Financial Analysis, Elsevier, vol. 78(C).
    3. Yongsik Kim, 2020. "Announcement Effects of Convertible and Warrant Bond Issues with Embedded Refixing Option: Evidence from Korea," Sustainability, MDPI, vol. 12(21), pages 1-21, October.
    4. Tadeusz Dudycz & Bogumiła Brycz, 2021. "Why the Par Value of Share Matters to Investors," IJFS, MDPI, vol. 9(1), pages 1-20, March.
    5. Scott Walker, 2015. "Repeated Dividend Increases: A Collection of Four Essays," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 17, July-Dece.
    6. Al-Yahyaee, Khamis Hamed, 2014. "Shareholder wealth effects of stock dividends in a unique environment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 66-81.

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