Impact of Share Splits on Stock Returns: Evidences from India

Bilal Ahmad Pandow and Khurshid Ahmad Butt

Vision, 2019, vol. 23, issue 4, 432-441

Abstract: This article empirically examines the impact of stock splits on the price movements and returns of the scrips listed on the stock market in India. The study makes use of the standard event study methodology to measure the significance of unusual yield associated with the event. To calculate the returns, the study employs market model. Also, it uses parametric tests, such as t -statistic, and non-parametric test, such as Corrado Rank Test, Generalized Rank Test and Sign Test, to check the significance and robustness of abnormal return (AR), average AR, and cumulative average AR. Indisputably, the results are somewhat different from the evidences found in developed markets. Mostly in these countries, the event witnesses unusual optimistic yields. The results suggest that there is a positive AR adjacent to the effective day (ED) of the event in the short run. However, in the long run, negative ARs in the post-effective to ED+90 days window is witnessed. Further, the analysis also suggests that share splits do not have a positive influence on the share capital of the investors. The results are based on the 10-days event and 90-days estimation window and are the main limitation of the study. Hence, the windows can be both expanded and reduced to have a better holistic impact analysis of the share splits and stock returns of the selected firms.

Keywords: Share Split; Event Study; Stock Returns; Share Price (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:vision:v:23:y:2019:i:4:p:432-441

DOI: 10.1177/0972262919868130

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