Can stock splits generate abnormal stock performance in post-crisis era? Evidence from the new york stock exchange
Can stock splits generate abnormal stock performance in post-crisis era? Evidence from the new york stock exchange

Summary/Abstract: Stock splits have puzzled researchers and practitioners for a very long time. I consider the stock splits performed between 2009 and May 2011 inclusive by companies listed on the New York Stock Exchange. In particular, I examine whether the shareholders’ wealth is changed as a result of the stock–split event as of the split execution day and in the event window [40;+40] using Mean Adjusted Return Method and Market Model Method. The results obtained indicate no significant abnormal rates of return on the split date. Furthermore, I find shareholders’ wealth deterioration in the aftermath of the split after reporting a decline in the cumulative abnormal rates of return by 9.80% and 5.49% under both methods, respectively, all 1–percent significant. Moreover, I document a slippage in the volatility as measured with the standard deviation of abnormal rates of return by 26.98% and 6.04%, respectively. Summarizing, as opposed to the market efficiency hypothesis stock splits alter some of the stock’s characteristics even though they are expected to increase only he number of shares outstanding.

• Details
• Contents