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Stock Splits, A Survey

Author

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  • Yildizhan, Celim

Abstract

In this survey paper I summarize the literature's findings on the short-run and long-run effects of stock split announcements as well as what happens in the preceding and subsequent years around a stock split event. I also summarize how firm characteristics influence these results. Furthermore, I discuss the various theories regarding why splits occur and why stock return distributions change subsequent to split events. I specifically focus on the changes in the first and second moments of stock returns and analyze related theories such as optimal trading, optimal tick size, liquidity, and signaling. More importantly I present the pros and cons of each of these theories and discuss which of them are more plausible. I suggest that a combination of the several theories suggested in the literature can rationally explain the return distribution changes around stock splits. I conclude with suggestions for future research.

Suggested Citation

  • Yildizhan, Celim, 2006. "Stock Splits, A Survey," MPRA Paper 53888, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:53888
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    More about this item

    Keywords

    Stock split; stock splits; split ex-date; split announcement; optimal tick size; clientele changes; survey on stock splits;

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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