The Information Content of Multiple Stock Splits

Posted: 14 Sep 2008

See all articles by Gow-Cheng Huang

Gow-Cheng Huang

Alabama State University - Department of Accounting and Finance

Kartono Liano

Mississippi State University - Department of Finance and Economics

Herman Manakyan

Western Kentucky University - Department of Accounting and Finance

Ming-Shiun Pan

Shippensburg University - Department of Finance and Management Information & Analysis

Date Written: September 12, 2008

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 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.

Keywords: Frequency of stock splits, trading range/liquidity hypothesis, signaling

JEL Classification: G14

Suggested Citation

Huang, Gow-Cheng and Liano, Kartono and Manakyan, Herman and Pan, Ming-Shiun, The Information Content of Multiple Stock Splits (September 12, 2008). Financial Review, Vol. 43, No. 4, November 2008, Available at SSRN: https://ssrn.com/abstract=1267484

Gow-Cheng Huang

Alabama State University - Department of Accounting and Finance ( email )

P.O. Box 271
Montgomery, AL 36101-0271
United States
334-229-6920 (Phone)
334-265-0914 (Fax)

Kartono Liano (Contact Author)

Mississippi State University - Department of Finance and Economics ( email )

P.O. Box 9580
Mississippi State, MS 39762
United States
601-325-1981 (Phone)
601-325-1977 (Fax)

Herman Manakyan

Western Kentucky University - Department of Accounting and Finance ( email )

1 Big Red Way
Bowling Green, KY 42101
United States
502-745-2925 (Phone)
502-745-5284 (Fax)

Ming-Shiun Pan

Shippensburg University - Department of Finance and Management Information & Analysis ( email )

Shippensburg University
Shippensburg, PA 17257
United States
717-477-1683 (Phone)
717-477-4067 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
702
PlumX Metrics