Why are Stock Splits Declining?

55 Pages Posted: 15 Mar 2011 Last revised: 21 May 2013

Date Written: May 1, 2013

Abstract

The percentage of firms undertaking stock splits has fallen from a peak of 23% in 1982 to less than 1% in 2009. Controlling for time trends and other economic determinants, the declining incidence of stock splits is significantly associated with a drop in household investors’ equity holdings and with a rise in household income. We also report a decline in the size of split factors which is associated with an increase in institutional ownership of equity and with the increase in household income. Collectively, the evidence is consistent withfirms responding rationally to changes in investor characteristics.

Keywords: Stock Splits, Liquidity, household equity ownership, household income, institutional ownership, split factor

JEL Classification: G31, G32, G35

Suggested Citation

Minnick, Kristina and Raman, Kartik, Why are Stock Splits Declining? (May 1, 2013). Available at SSRN: https://ssrn.com/abstract=1785757 or http://dx.doi.org/10.2139/ssrn.1785757

Kristina Minnick (Contact Author)

Bentley University ( email )

175 Forest Street
Waltham, MA 02154
United States

HOME PAGE: http://www.profminnick.com/

Kartik Raman

Bentley University ( email )

175 Forest Street
Waltham, MA 02154
United States

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