Reverse Stock Splits and Liquidity in ETFs

Olesya Lobanova and Alexandre Aidov ()
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Olesya Lobanova: College of Business, University of Houston-Victoria, Victoria, TX 77901, USA
Alexandre Aidov: College of Business, University of Houston-Victoria, Victoria, TX 77901, USA

JRFM, 2023, vol. 17, issue 1, 1-12

Abstract: This study aims to address a gap in the existing literature pertaining to the liquidity of exchange-traded funds (ETFs). Specifically, we examine the effect of reverse share splits on ETF liquidity. In contrast to equities, the utilization of ETFs enables the separation of signaling and liquidity considerations. Findings suggest that liquidity improves after reverse splits in both univariate and multivariate results. In the absence of delisting concerns, results support the liquidity hypothesis of stock splits.

Keywords: exchange-traded funds; liquidity; bid–ask spreads (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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