Structural Equation Modeling Applied to the Reaction to Stock Dividends and Stock Splits: integrating signaling, liquidity and optimal price level

Kelmara Mendes Vieira () and João Luiz Becker ()
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Kelmara Mendes Vieira: Universidade Federal de Santa Maria
João Luiz Becker: Universidade Federal do Rio Grande do Sul

Brazilian Review of Finance, 2011, vol. 9, issue 1, 69-104

Abstract: This work develops a hybrid model of structural equations able to take simultaneously the hypotheses of signaling, liquidity, and optimal price level to explain the reaction to the stock dividends and stock splits. In the measurement model four constructs were defined: trading activity, spread, size, and price. The structural model defines extant relations from the proposition of 22 sub-hypotheses. A sample of 321 splits performed in the Brazilian market between 1990 and 2004 was used for assessing the model. Confirmatory factor analysis revealed the validity and coherence of the four constructs. The structural model confirmed 9 original sub-hypotheses.

Keywords: stock dividend; stock splits; structural equations; signaling; liquidity; optimal price level (search for similar items in EconPapers)
JEL-codes: C51 D82 G12 G32 G35 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:9:y:2011:i:1:p:69-104

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