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The Performance of Stocks that are Reverse SplitTerrence F. MartellCity University of New York (CUNY) - Baruch College - Zicklin School of Business Gwendolyn P. WebbCity University of New York (CUNY) - Baruch College - Zicklin School of Business December 22, 2005 Abstract: An unusually high number of Nasdaq National Market stocks were reverse split following the decline in Nasdaq prices in the year 2000. We test whether these splits were driven by the overall market decline. We find that the performance of stocks with reverse splits in poor overall stock market conditions is better (less negative) than that in good market conditions, and that the differences in performance appear three to five months after the split. This suggests that the longer-term outcomes of reverse stock splits are associated with the market environment at the time of the split. In view of this, changes that Nasdaq made to relax some of its listing standards are well justified.
Number of Pages in PDF File: 31 Keywords: reverse stock splits, Nasdaq listing requirements JEL Classification: G14, G32 working papers seriesDate posted: May 6, 2006Suggested CitationContact Information
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