Stock splits: motivations and valuation effects in the Spanish market

Susana Menéndez () and Silvia Gómez-Ansón ()
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Susana Menéndez: Universidad de Oviedo, https://www.uniovi.es
Silvia Gómez-Ansón: Universidad de Oviedo, https://www.uniovi.es
Authors registered in the RePEc Author Service: Silvia Gómez Ansón

Investigaciones Economicas, 2003, vol. 27, issue 3, 459-490

Abstract: This study analyzes the motivations and valuation effects of stock splits in a "medium-sized market" such as the Spanish market. Our findings suggest that splitting firms present a pre-split stock price above the normal trading range, and that, after the split, the number of transactions and the average transaction size increase significantly. Moreover, positive abnormal returns are observed around announcement dates and around the ex-date. For the latter, however, these positive wealth effects are outweighed by the negative abnormal returns observed closely afterwards. Our findings suggest that the liquidity, or optimal trading range hypothesis, prevails over other hypotheses as an explanation for stock splits in the Spanish market. (Copyright: Fundación SEPI)

Keywords: Split; signal; liquidity; event-study. (search for similar items in EconPapers)
JEL-codes: G14 G35 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (1)

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