The Effect of Stock Splits on Liquidity and Excess Returns: Evidence from Shareholder Ownership Composition

Posted: 31 Oct 2002

See all articles by Patrick J. Dennis

Patrick J. Dennis

University of Virginia - McIntire School of Commerce

Deon Strickland

Arizona State University (ASU) - Finance Department

Abstract

We examine the influence of firm ownership composition on both the abnormal returns at the announcement of a stock split and liquidity changes following a stock split. We find three results. First, the largest post-split increase in institutional ownership occurs for firms that had low institutional ownership before the split. Second, changes in liquidity are negatively related to the level of institutional ownership before the split. Last, the abnormal return following a split is negatively related to the level of institutional ownership before the split. These findings are important as they shed new light on the source of stock split announcement returns.

JEL Classification: G14, G20, G32

Suggested Citation

Dennis, Patrick J. and Strickland, Deon, The Effect of Stock Splits on Liquidity and Excess Returns: Evidence from Shareholder Ownership Composition. Journal of Financial Research, Vol. 26, pp. 355-370, Fall 2003. Available at SSRN: https://ssrn.com/abstract=328103

Patrick J. Dennis (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
804-924-4050 (Phone)

Deon Strickland

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

HOME PAGE: http://wpcarey.asu.edu/directory/stafffaculty.cfm?cobid=2168669

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