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Intra‐Industry Reactions to Stock Split Announcements

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  • Oranee Tawatnuntachai
  • Ranjan D'Mello

Abstract

We examine whether favorable information conveyed by stock split announcements transfers to nonsplitting firms within the same industry. On average, nonsplitting firms' shareholders experience positive and significant abnormal returns at the stock split announcements of their industry counterparts. In addition, industrywide and firm‐specific characteristics are important determinants in explaining nonsplitting firms' stock returns. These firms' earnings increase significantly, and the earnings changes are positively related to the stock price reactions. Finally, we find no evidence that investors revise the value of nonsplitting firms because they anticipate a decline in earnings volatility.

Suggested Citation

  • Oranee Tawatnuntachai & Ranjan D'Mello, 2002. "Intra‐Industry Reactions to Stock Split Announcements," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(1), pages 39-57, March.
    • Handle: RePEc:bla:jfnres:v:25:y:2002:i:1:p:39-57
    DOI: 10.1111/1475-6803.00003
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    Cited by:

    1. Beladi, Hamid & Chao, Chi Chur & Hu, May, 2016. "Another January effect—Evidence from stock split announcements," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 123-138.
    2. Xin Yu & Peng Zhang & Ying Zheng, 2015. "Corporate Governance, Political Connections, and Intra-Industry Effects: Evidence from Corporate Scandals in China," Financial Management, Financial Management Association International, vol. 44(1), pages 49-80, March.
    3. Huang, Jian & Jain, Bharat A. & Torna, Gökhan, 2018. "Anticipating loss from proxy contests," Journal of Business Research, Elsevier, vol. 83(C), pages 160-172.
    4. Fang Chen & Jian Huang & Han Yu, 2018. "The Intra-Industry Effects of Proxy Contests," Proceedings of the 8th International RAIS Conference, March 26-27, 2018 001, Research Association for Interdisciplinary Studies.
    5. Yan Zeng & Josie McLaren, 2015. "The impact of large public sales of Government assets: empirical evidence from the Chinese stock markets on a gradual and offer-to-get approach," Review of Quantitative Finance and Accounting, Springer, vol. 45(1), pages 137-173, July.
    6. Hu, May & Tuilautala, Mataiasi & Kang, Yuni, 2019. "Bandwagon effect: Special dividend payments," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 339-363.
    7. Liu, Beibei & Tan, Keqi & Wong, Sonia M.L. & Yip, Rita W.Y., 2022. "Intra-industry information transfer in emerging markets: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 140(C).
    8. Peng Xie & Jiming Wu & Hongwei Du, 2019. "The relative importance of competition to contagion: evidence from the digital currency market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-19, December.

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