Reverse splits in international stock markets: Reconciling the evidence on long-term returns

Adam Zaremba (), Szymon Okoń, Roman Asyngier and Lucia Schroeter

Research in International Business and Finance, 2019, vol. 47, issue C, 552-562

Abstract: Do firms conducting reverse splits underperform or overperform in the long run? To resolve this question we investigate the long-term returns following more than 5000 reverse splits conducted in 24 developed equity markets between the years 1990 and 2016. Using the calendar-time portfolio approach, we demonstrate that reverse splits lead to subsequent underperformance, except for microcaps in the sample. This phenomenon is present in all the global regions we examined—North America, Europe, and Asia-Pacific—and is robust to many considerations.

Keywords: Reverse split; Share consolidation; Long-Run returns; International markets; Long-Term event study; Penny stocks; Micro-Caps (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G15 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:47:y:2019:i:c:p:552-562

DOI: 10.1016/j.ribaf.2018.10.001

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