Corporate Social Responsibility and Stock Split

Review of Quantitative Finance & Accounting (Forthcoming)

Posted: 14 Sep 2018

See all articles by Maretno A. Harjoto

Maretno A. Harjoto

Pepperdine University - Pepperdine Graziadio Business School (PGBS)

Dongshin Kim

Pepperdine Graziadio Business School

Indrarini Laksmana

Kent State University - Department of Accounting

Rick Walton

Pepperdine Graziadio Business School

Date Written: August 30, 2018

Abstract

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

Harjoto, Maretno Agus and Kim, Dongshin and Laksmana, Indrarini and Walton, Richard, Corporate Social Responsibility and Stock Split (August 30, 2018). Review of Quantitative Finance & Accounting (Forthcoming). Available at SSRN: https://ssrn.com/abstract=3241187

Maretno Agus Harjoto (Contact Author)

Pepperdine University - Pepperdine Graziadio Business School (PGBS) ( email )

Drescher Campus Suite 344
24255 Pacific Coast Highway
Malibu, CA 90263
United States
(310) 506-8542 (Phone)
(310) 506-4126 (Fax)

HOME PAGE: http://scholar.google.com/citations?hl=en&user=9-PfQi0AAAAJ

Dongshin Kim

Pepperdine Graziadio Business School ( email )

Malibu, CA
United States
(310) 506-7406 (Phone)

HOME PAGE: http://https://bschool.pepperdine.edu/about/people/faculty/dongshin-kim/

Indrarini Laksmana

Kent State University - Department of Accounting ( email )

P.O. Box 5190
Kent, OH 44242-0001
United States

Richard Walton

Pepperdine Graziadio Business School ( email )

Malibu, CA
United States
310-568-5333 (Phone)

HOME PAGE: http://https://bschool.pepperdine.edu/about/people/faculty/rick-walton/

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