CANADIAN STOCK SPLITS AND FINANCIAL ANALYST FORECASTS: TESTING SIGNALING AND ATTENTION EFFECTS

Jean-Pierre Gueyié, Ramzi Ben Sedrine and Roger B. Atindehou

The International Journal of Business and Finance Research, 2007, vol. 1, issue 1, 11-20

Abstract: This paper analyses Canadian market reaction to stock splits over the period 1985-2000. It then attempts to explain this reaction by two hypotheses, namely signaling and attention hypotheses. Results indicate that the Canadian market reacts positively to stock split announcements. Positive average abnormal returns of 1.76% and 1.14% are reported for the announcement date and the following day, respectively. This market reaction is partly explained by signaling hypothesis. An earning prediction error of 115.05% after the announcement date is observed, giving support to this hypothesis. However, the authors are unable to validate the attention hypothesis in Canadian markets. The average revision rate of earnings per share by financial analysts is 3.49%, but is not significant.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:11-20

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