Stock Splits, A Survey

Yildizhan, Celim (2006): Stock Splits, A Survey.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Stock split, stock splits, split ex-date, split announcement, optimal tick size, clientele changes, survey on stock splits
• Subjects: G - Financial Economics > G0 - General > G00 - General; G - Financial Economics > G1 - General Financial Markets > G10 - General; G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General

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