Stock Split Decisions: A Synthesis of Theory and Evidence
19 Pages Posted: 12 Nov 2015
Date Written: November 12, 2015
This paper reviews various studies of forward and reverse stock splits in the areas of motives for splits, split practices, split effects on firm value, and changes in market activities around splits. It focuses on three hypotheses and their extended evidence. As our analysis shows, the optimal price/tick hypothesis is widely supported and applied; the signaling hypothesis is supported by limited empirical results; and the procedure/structure hypothesis, backed up by some evidence, complements the first and second hypotheses.
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