The Effect of Stock Splits on Excess Returns: Evidence from Istanbul Stock Exchange
Posted: 15 Jan 2001
Date Written: July 2000
Since Istanbul Stock Exchange is a young emerging stock exchange, the Turkish companies lack of equity capital. In a high inflationary world without having an inflation accounting system paying cash dividend can be disastrous for firms with low equity capital base. Therefore it is hardly difficult to observe cash dividend payments. The basic result of this widely used application is low dividend yields in emerging markets. As an emerging market investors seem to be attracted by capital gains and especially by gratis shares which can be seen as stock splits. Although stock splits seem to be a cosmetic transaction there are empirical evidence for United States that splits have effect on liquidity and returns. The purpose of the paper is to investigate the effects of stock splits on (liquidity and) excess returns and compare the results with the developed stock exchange cases. (Also the attention will be paid to price elasticity of demand during and after stock splits.)
* Concepts which are not considered in the paper, but were seen in the first draft of the above abstract are indicated in parentheses.
Keywords: Stock splits
JEL Classification: G14
Suggested Citation: Suggested Citation