Stock Splits and Stock Dividends: Why, Who, and When

Josef Lakonishok and Baruch Lev

Journal of Finance, 1987, vol. 42, issue 4, 913-32

Abstract: This study investigates empirically why firms split their stock or distribute stock dividends and why the market reacts favorably to these distributions. The findings suggest that stock splits are mainly aimed at restoring stock prices to a "normal range." Some support can also be found for the oft-mentioned signaling motive of stock splits. Stock dividends are altogether different from stock splits and they appear to be a decreasing phenomenon. The clue to stock dividend distributions may lie in their perceived substitution for relatively low cash dividends. Copyright 1987 by American Finance Association.

Date: 1987
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