Do Reverse Stock Splits Benefit Long-term Shareholders?

Jae-Kwang Hwang (), Young Dimkpah () and Alex Ogwu ()

International Advances in Economic Research, 2012, vol. 18, issue 4, 439-449

Abstract: This paper examines the market response of the reverse stock splits by using the effective date to trace the abnormal returns after reverse splits over the period of 1981 to 2010:3. The findings show that the short-term behavior of the abnormal returns on the effective date is negative and highly significant for all firms. The abnormal returns on the effective month are negative and highly significant. As expected, the cumulative abnormal returns are negative and significant at 10 % level over the period of +1 to +12 months. However, the cumulative abnormal returns from month +13 to month +36 are significantly positive. Our findings also support that institutional investors show confidence by increasing mean holdings of reverse splits of large capital stocks. Copyright International Atlantic Economic Society 2012

Keywords: Reverse stock splits; Abnormal return; Fama-French-Momentum model; G14 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s11294-012-9370-3

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