The Performance of Stocks that are Reverse Split
31 Pages Posted: 6 May 2006
Date Written: 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.
Keywords: reverse stock splits, Nasdaq listing requirements
JEL Classification: G14, G32
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Market Efficiency, Long-Term Returns, and Behavioral Finance
-
Market Underreaction to Open Market Share Repurchases
By David L. Ikenberry, Josef Lakonishok, ...
-
Managerial Decisions and Long-Term Stock Price Performance
By Mark L. Mitchell and Erik Stafford
-
Price Reactions to Dividend Initiations and Omissions: Overreaction or Drift?
By Roni Michaely, Richard H. Thaler, ...
-
By Alon Brav
-
The Effects of Capital Structure Change on Security Prices: A Study of Exchange Offers
-
The Long-Run Performance of Stock Returns Following Debt Offerings
-
Stock Repurchases in Canada: Performance and Strategic Trading
By David L. Ikenberry, Josef Lakonishok, ...