Corporate Social Responsibility and Stock Split
Review of Quantitative Finance & Accounting (Forthcoming)
Posted: 14 Sep 2018
Date Written: August 30, 2018
This study examines whether socially responsible companies are likely to conduct a stock split. We argue that these companies, compared to their counterparts, could use their strong corporate social responsibility (CSR) performance to reduce information asymmetry with shareholders, and therefore, are less likely to rely on stock splits to signal their future growth potentials. We find empirical evidence to support our hypothesis and investigate the reasons for the lower frequency of stock splits among CSR oriented firms. We find that more socially responsible firms experience a smaller increase in trading volume and a greater increase in bid-ask spread following a stock split than less socially responsible firms. Furthermore, our study finds that, when more socially responsible firms decide to conduct a stock split, they attract a greater proportion of institutional investors with long-term investment horizons.
Keywords: Stock Split, CSR, Signaling, Stakeholder Theory, Liquidity, Long-Term Return
JEL Classification: G30, G35, M14, G32
Suggested Citation: Suggested Citation