Institutional ownership around stock splits

Fengyu Li, Mark H. Liu and Shi, Yongdong (Eric)

Pacific-Basin Finance Journal, 2017, vol. 46, issue PA, 14-40

Abstract: Studies on the underlying reasons for stock splits can be broadly categorized into two groups: those argue that firms use stock splits to signal favorable private information to the market and those argue that stock splits are used to improve liquidity. We shed light on this issue by examining the change in institutional holdings around stock splits and find that institutional investors, especially short-term investors, increase their holding of the splitting firm's stock. The change in short-term institutional ownership is positively related to the improvement in firm's information environment, especially for less liquid stocks and stocks that are not widely held by institutional investors. Our evidence supports the liquidity hypothesis instead of the signaling hypothesis of stock splits.

Keywords: Stock splits; Liquidity; Idiosyncratic volatility; Price informativeness; Institutional investors (search for similar items in EconPapers)
JEL-codes: G11 G14 G24 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X17302202
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:46:y:2017:i:pa:p:14-40

DOI: 10.1016/j.pacfin.2017.06.011

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().