Thirty Years of Stock Splits, Reverse Stock Splits, and Stock Dividends in Canada
32 Pages Posted: 14 Apr 2005
Date Written: June 2004
Abstract
We use thirty years of Canadian evidence to shed light on the implications of Stock Splits, stock dividends and reverse splits. We focus on the period around -60 months to +60 months of the event month and examine changes in returns, eps, betas, trading volume, number of transactions and P/E ratios. Our results indicate that there is no information signalling since the performance of stocks in the post-event period is less than pre-event but there is an increase in the trading volume but the per transaction trading volume decreases considerably. This evidence supports the optimum price hypothesis and a change in the shareholder composition. In addition we show that there is a permanent change in the valuation parameter as denoted by P/E ratios possibly as a result of a shift between institutional investors to individual investors.
Keywords: stock splits, stock dividends, reverse stock split
JEL Classification: G32, G35
Suggested Citation: Suggested Citation
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