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Stock splits in a neutral transaction cost environment: Evidence from the Athens Stock Exchange

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  • Leledakis, George N.
  • Papaioannou, George J.
  • Travlos, Nickolaos G.
  • Tsangarakis, Nickolaos V.

Abstract

This paper investigates the value consequences of stock splits in a market where institutional characteristics minimize the effects of price realignment and signaling. We find that despite these market conditions, stock splits by Greek firms produce positive price reaction around the announcement day. Further, split factors are directly related to pre-split price levels and deviations from average market prices. Splitting firms also realize earnings improvement which is not reversed after the stock split. Consistent with these findings, market reaction is inversely related to the post-split target price and the size of firm. We interpret this as evidence in support, respectively, of the self-selection and "attention-gathering" hypotheses. As reported in other international studies, there is no evidence of liquidity improvement.

Suggested Citation

  • Leledakis, George N. & Papaioannou, George J. & Travlos, Nickolaos G. & Tsangarakis, Nickolaos V., 2009. "Stock splits in a neutral transaction cost environment: Evidence from the Athens Stock Exchange," Journal of Multinational Financial Management, Elsevier, vol. 19(1), pages 12-25, February.
  • Handle: RePEc:eee:mulfin:v:19:y:2009:i:1:p:12-25
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    References listed on IDEAS

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    Cited by:

    1. Kevin Campbell & Chijioke Ohuocha, 2011. "The stock market reaction to stock dividends in Nigeria and their information content," Managerial Finance, Emerald Group Publishing, vol. 37(3), pages 295-311, February.
    2. Yagüe, José & Gómez-Sala, J. Carlos & Poveda-Fuentes, Francisco, 2009. "Stock split size, signaling and earnings management: Evidence from the Spanish market," Global Finance Journal, Elsevier, vol. 20(1), pages 31-47.
    3. Cahit Adaoglu & Meziane Lasfer, 2011. "Why Do Companies Pay Stock Dividends? The Case of Bonus Distributions in an Inflationary Environment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 38(5-6), pages 601-627, June.
    4. Stavroyiannis, S. & Makris, I. & Nikolaidis, V., 2010. "Non-extensive properties, multifractality, and inefficiency degree of the Athens Stock Exchange General Index," International Review of Financial Analysis, Elsevier, vol. 19(1), pages 19-24, January.

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