The Information Content of Multiple Stock Splits

25 Pages Posted: 16 Oct 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

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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 the 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.

Suggested Citation

Huang, Gow-Cheng and Liano, Kartono and Manakyan, Herman and Pan, Ming-Shiun, The Information Content of Multiple Stock Splits. Financial Review, Vol. 43, Issue 4, pp. 543-567, November 2008. Available at SSRN: https://ssrn.com/abstract=1281709 or http://dx.doi.org/10.1111/j.1540-6288.2008.00205.x

Gow-Cheng Huang (Contact Author)

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

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)

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