THE EFFECTS OF STOCK SPLITS ON THE OWNERSHIP MIX OF A FIRM

Gary E. Powell and H. Kent Baker

Review of Financial Economics, 1993, vol. 3, issue 1, 70-88

Abstract: This paper examines the relationship between stock splits and the ownership mix of firms. Previous studies suggest that firms issue stock splits to lower their stock price into an optimal range so small investors can more easily afford to buy round lots. The results of this paper show a positive relationship between stock splits and institutional ownership but no effect on the firm's number of shareholders. Thus, the percentage of shares owned by individual investors decreases after a stock split. The inverse relationship between institutional ownership and a firm's total assets suggests that small firms use stock splits to attract attention from Wall Street.

Date: 1993
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https://doi.org/10.1002/j.1873-5924.1993.tb00573.x

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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:3:y:1993:i:1:p:70-88

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