What Do Stock Splits Really Signal?
J. OF FINANCIAL AND QUANTITATIVE ANALYSIS, September 1996
Posted: 25 Nov 1996
Abstract
We observe significant post-split excess returns of 7.93% in the first year and 12.15% in the first three years for a sample of 1,275 two-for-one stock splits. These excess returns follow an announcement return of 3.38%, indicating that the market underreacts to split announcements. The evidence suggests that splits realign prices to a lower trading range, but managers self-select by conditioning the decision to split on expected future performance. Pre-split runup and post-split excess return are inversely related, indicating that our results are not caused by momentum.
JEL Classification: G39
Suggested Citation: Suggested Citation
Ikenberry, David L. and Rankine, Graeme and Stice, Earl K., What Do Stock Splits Really Signal?. J. OF FINANCIAL AND QUANTITATIVE ANALYSIS, September 1996, Available at SSRN: https://ssrn.com/abstract=7929
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.