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Real determinants of stock split announcements

May Hu, Chi-Chur Chao, Chris Malone and Martin Young

International Review of Economics & Finance, 2017, vol. 51, issue C, 574-598

Abstract: This paper examines the aggregate determinants of corporate events of stock splits. The evidence shows that good market conditions drive firms’ decisions to split shares and increase their associated returns, but the dominant effect of macroeconomic factors on stock split announcements is business cycle variations. Firms are most likely to split their shares when they have been experiencing enough excess earnings in economic upturns. This result is more consistent with the Neoclassical Efficiency Hypothesis. This research sheds light on the reasons why we observe corporate events happening in waves and enhance the understanding of why firms split shares at the aggregate level.

Keywords: Market driven; Business cycle; Stock splits (search for similar items in EconPapers)
JEL-codes: G12 G14 G34 (search for similar items in EconPapers)
Date: 2017
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