Stock Splits, A Survey

Celim Yildizhan

MPRA Paper from University Library of Munich, Germany

Abstract: In this survey paper I summarize the literature's findings on the short-run and long-run effects of stock split announcements as well as what happens in the preceding and subsequent years around a stock split event. I also summarize how firm characteristics influence these results. Furthermore, I discuss the various theories regarding why splits occur and why stock return distributions change subsequent to split events. I specifically focus on the changes in the first and second moments of stock returns and analyze related theories such as optimal trading, optimal tick size, liquidity, and signaling. More importantly I present the pros and cons of each of these theories and discuss which of them are more plausible. I suggest that a combination of the several theories suggested in the literature can rationally explain the return distribution changes around stock splits. I conclude with suggestions for future research.

Keywords: Stock split; stock splits; split ex-date; split announcement; optimal tick size; clientele changes; survey on stock splits (search for similar items in EconPapers)
JEL-codes: G00 G10 G30 (search for similar items in EconPapers)
Date: 2006-08-01
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https://mpra.ub.uni-muenchen.de/53943/1/MPRA_paper_53888.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:53888

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