Market Reaction around the Event of a Stock Split: An Analysis on the Dhaka Stock Exchange

Md Saimum Hossain

International Journal of Business and Management, 2017, vol. 12, issue 7, 212

Abstract: Stock splits, in an efficient market, are not supposed to bear any consequence on the price of a company’s stocks. However, both corporate management and regulators have tended to go through this exercise which make us think that through a stock split, either a management-induced event or a mandatory regulatory event, companies and regulators must expect to gain something. This study analyzes one such event of regulator-induced stock split in the Bangladesh markets that took place in December 2011. After studying the empirical results based on the sample of 117 mandatory stock splits in December 2011, it is found that there is overall sort of an equal distribution of positive and negative excess return pattern on both sides of the event date. Moreover, we accept the null hypothesis since the calculated t-values for the aer and caer during the 30 trading days (the event window) fall mostly within the acceptance region. Therefore, unlike some of the views presented in earlier literature concerning effects of stock splits in different markets around the world, this study found that stock splits, especially when they are undertaken as per regulatory directives, are basically a neutral event. One strong explanation for this finding can be the mandatory nature of the split because most of the previous studies undertaken used sample data sets containing management-decision induced stock splits.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ccsenet.org/journal/index.php/ijbm/article/download/67039/37489 (application/pdf)
http://www.ccsenet.org/journal/index.php/ijbm/article/view/67039 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijbmjn:v:12:y:2017:i:7:p:212

Access Statistics for this article

More articles in International Journal of Business and Management from Canadian Center of Science and Education Contact information at EDIRC.
Bibliographic data for series maintained by Canadian Center of Science and Education (ijbm@ccsenet.org).