Opportunistic stock splits

52 Pages Posted: 28 Jun 2016 Last revised: 29 Jun 2020

See all articles by Ahmed Elnahas

Ahmed Elnahas

University of Texas - Pan American - College of Business Administration - Department of Economics & Finance

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics

Date Written: June 27, 2020

Abstract

We investigate CEOs who combine insider selling with stock splits, which is suspicious because dumping stocks is inconsistent with the positive stock-split signal. Our empirical results indicate that, compared with other splits, these suspicious splits are followed by a 53 percent lower buy-and-hold-abnormal return, a 68 percent higher likelihood of announcing an earnings restatement, and a 48 percent higher likelihood of CEO turnover within the 5-year, post-split period. Our results are robust to the use of propensity-score matching and to controlling for CEO characteristics, incentives, and corporate governance. Our findings concerning these stock splits highlight agency issues that are understudied.

Suggested Citation

Elnahas, Ahmed and Jain, Pankaj K. and McInish, Thomas H., Opportunistic stock splits (June 27, 2020). Available at SSRN: https://ssrn.com/abstract=2800765 or http://dx.doi.org/10.2139/ssrn.2800765

Ahmed Elnahas (Contact Author)

University of Texas - Pan American - College of Business Administration - Department of Economics & Finance ( email )

1201 W. University Drive
Edinburg, TX 78539-2999
United States

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States
901-678-4662 (Phone)
901-678-3006 (Fax)

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