The Valuation Effects of Stock Splits and Stock Dividends

36 Pages Posted: 21 Jun 2007

See all articles by Mark Grinblatt

Mark Grinblatt

University of California, Los Angeles (UCLA) - Finance Area; Yale University - International Center for Finance; National Bureau of Economic Research (NBER)

Ronald W. Masulis

University of New South Wales, Sydney; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Abstract

This study presents evidence which indicates that stock prices, on average, react positively to stock dividend and stock split announcements that are uncontaminated by other contemporaneous firm-specific announcements. In addition, it documents significantly positive excess returns on and around the ex-dates of stock dividends and splits. Both announcement and ex-date returns were found to be larger for stock dividends than for stock splits. While the announcement returns cannot be explained by forecasts of imminent increases in cash dividends, the paper offers several signaling based explanations for them. These are consistent with a cross-sectional analysis of the announcement period returns.

Keywords: Stock splits, stock dividends, signalling, announcement effects, ex-date effects

JEL Classification: D82, G14, G35

Suggested Citation

Grinblatt, Mark and Masulis, Ronald W. and Titman, Sheridan, The Valuation Effects of Stock Splits and Stock Dividends. Journal of Financial Economics (JFE), Vol. 13, No. 4, 1984, Available at SSRN: https://ssrn.com/abstract=995759

Mark Grinblatt

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-1098 (Phone)
310-206-5455 (Fax)

Yale University - International Center for Finance

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New Haven, CT 06520-8200
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National Bureau of Economic Research (NBER)

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Ronald W. Masulis (Contact Author)

University of New South Wales, Sydney ( email )

UNSW Business School
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Sydney, NSW 2052
Australia
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612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )

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Belgium

Financial Research Network (FIRN)

C/- University of Queensland Business School
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Queensland
Australia

HOME PAGE: http://www.firn.org.au

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

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1 Business Link
Singapore, 117592
Singapore

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

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United States