The Valuation Effects of Stock Splits and Stock Dividends
University of California, Los Angeles (UCLA) - Finance Area; Yale University - International Center for Finance; National Bureau of Economic Research (NBER)
Ronald W. Masulis
University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN)
University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)
Journal of Financial Economics (JFE), Vol. 13, No. 4, 1984
This study presents evidence which indicates that stock prices, on average, react positively to stock dividend and stock split announcements that are uncontaminated by other contemporaneous firm-specific announcements. In addition, it documents significantly positive excess returns on and around the ex-dates of stock dividends and splits. Both announcement and ex-date returns were found to be larger for stock dividends than for stock splits. While the announcement returns cannot be explained by forecasts of imminent increases in cash dividends, the paper offers several signaling based explanations for them. These are consistent with a cross-sectional analysis of the announcement period returns.
Number of Pages in PDF File: 36
Keywords: Stock splits, stock dividends, signalling, announcement effects, ex-date effects
JEL Classification: D82, G14, G35Accepted Paper Series
Date posted: June 21, 2007
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