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Are Stock Spilts Credible Signals? Evidence from Short Interest Data

Author

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  • Padma Kadiyala
  • Michael Vetsuypens

Abstract

We propose the change in short interest as a new metric of the signaling strength of a corporate event. If an event signals positive information, short interest should decline at the event announcement. We study short interest around stock split announcements made by NYSE firms during 1990-94. Short interest does not decline around stock splits, which suggests that the typical split does not convey a positive signal. However, short interest declines for the subset of the sample characterized by favorable industry-adjusted pre-split performance. Short interest increases significantly for firms that experience post-split liquidity improvements.

Suggested Citation

  • Padma Kadiyala & Michael Vetsuypens, 2002. "Are Stock Spilts Credible Signals? Evidence from Short Interest Data," Financial Management, Financial Management Association, vol. 31(1), Spring.
  • Handle: RePEc:fma:fmanag:kadiyala02
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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. Arie E. Gozluklu & Pietro Perotti & Barbara Rindi & Roberta Fredella, 2013. "Removing the Trade Size Constraint? Evidence from the Italian Market Design," Working Papers 493, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    3. repec:eee:pacfin:v:46:y:2017:i:pa:p:14-40 is not listed on IDEAS
    4. 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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