Stock Split Decisions: A Synthesis of Theory and Evidence

19 Pages Posted: 12 Nov 2015

See all articles by Yan He

Yan He

Indiana University Southeast - School of Business

Junbo Wang

Dept. of Economics and Finance, City Univ. of HK

Date Written: November 12, 2015

Abstract

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.

Suggested Citation

He, Yan and Wang, Junbo, Stock Split Decisions: A Synthesis of Theory and Evidence (November 12, 2015). Journal of Applied Finance (Formerly Financial Practice and Education), Vol. 22, No. 2, 2012, Available at SSRN: https://ssrn.com/abstract=2689804

Yan He

Indiana University Southeast - School of Business ( email )

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812-941-2308 (Phone)
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Junbo Wang (Contact Author)

Dept. of Economics and Finance, City Univ. of HK ( email )

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Kowloon Town
Kowloon, 220
Hong Kong
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