Long-Run Common Stock Returns Following Stock Splits and Stock Dividends

Posted: 25 Aug 1998

See all articles by Hemang Desai

Hemang Desai

Southern Methodist University (SMU) - Accounting Department

Prem C. Jain

Georgetown University - Department of Accounting and Business Law

Abstract

We examine one-to three-year performance of common stocks following stock split and stock dividend announcements made during the period 1976 to 1991. The average one-and three-year buy-and-hold abnormal returns after the announcement month are 8.19% and 7.55% respectively. Also, smaller firms exhibit larger announcement period as well as larger one-to three-year abnormal returns. The results cannot be explained away by general cash-dividend increase announcements or earnings announcements. Overall, the results are consistent with the hypothesis that the market underreacts to the stock split and the stock dividend announcements.

JEL Classification: G14, G35

Suggested Citation

Desai, Hemang and Jain, Prem C., Long-Run Common Stock Returns Following Stock Splits and Stock Dividends. Available at SSRN: https://ssrn.com/abstract=6561

Hemang Desai

Southern Methodist University (SMU) - Accounting Department ( email )

United States
214-768-3185 (Phone)
214-768-4099 (Fax)

Prem C. Jain (Contact Author)

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Georgetown Univeristy
Washington, DC 20057
United States
202-697-9455 (Phone)

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