Download or read book Long Run Common Stock Returns Following Stock Splits and Reverse Splits written by Hemang Desai and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine one- to three-year performance of common stocks following 5596 stock split and 76 reverse split announcements made during the period 1976 to 1991. For stock splits, on average, the one- and three-year buy-and- hold abnormal after the announcement month are 7.05% and 11.87%, respectively. For reverse splits, the corresponding abnormal returns are - 10.76% and -33.90%. The results suggest that the market underreacts to both the stock split and the reverse split announcements. We also provide evidence that the signal in stock splits is related to change in dividends. In particular, the announcement period and the long-run abnormal returns are both positively associated with an increase in dividends.

Download or read book Long Run Common Stock Returns Following Stock Splits and Stock Dividends written by Hemang Desai and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine one-to three-year performance of common stocks following stock split and stock dividend announcements made during the period 1976 to 1991. The average one-and three-year buy-and-hold abnormal returns after the announcement month are 8.19% and 7.55% respectively. Also, smaller firms exhibit larger announcement period as well as larger one-to three-year abnormal returns. The results cannot be explained away by general cash-dividend increase announcements or earnings announcements. Overall, the results are consistent with the hypothesis that the market underreacts to the stock split and the stock dividend announcements.

Download or read book The Market Reaction to Stock Splits and the Ability to Earn Abnormal Returns written by Phương Anh Nguyễn and published by . This book was released on 2010 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: A stock split is often regarded as a pure cosmetic accounting treatment and yet prior research shows that the market reacts positively upon the arrival of the split announcement. However, up to now, there has not been any convincing explanation for this favourable response while there is intense debate amongst researchers about whether these positive abnormal returns persist in the future. We revisit the issues related to the performance of splitting companies both around and following the announcement date. This allows us to study the information content of the event and assess whether the market has incorporated the implication of such information in a timely manner. In addition, we hope to draw meaningful inference about the profitability of trading following the announcement date. Our findings suggest that there is information in the split announcements, which is positively valued by the market. However, abnormal returns cannot be earned with certainty following the event. This is evident in both the option market and the stock market. Specifically, if informed investors use the option market to trade on their information, then our results indicate that informed investors do not believe in the success of a strategy that buys splitting companies subsequent to the announcement date. This is because the post-split announcement drift does not exist following every split; it is conditioned on whether the firms will split again in the future. While prior studies argue that the long-run abnormal returns are sensitive to the time period, we find that the aggregate long-run abnormal returns are higher in a time period where there is a large proportion of companies that split multiple times. Nevertheless, knowing whether the companies have split multiple times in the past will not lead to positive abnormal returns ex-ante; these returns can only be guaranteed if investors are able to forecast accurately which sample firms will implement another split in the future. Once the split again condition is controlled for, there is no role for the time period to influence the magnitude and significance of the abnormal returns. We also discover that firms that have not split before consistently outperform firms that have. This implies that instead of buying every company that splits, investors can achieve higher returns by focusing on those that have not split in the recent past. However, the profitability of this strategy depends on the state of the market (bull versus bear market). In summary, the thesis shows that while stock splits are perceived as good news by investors, abnormal returns cannot be guaranteed following the announcement date. The information contained in a stock split is incorporated into stock prices in a timely manner, however, what type of information this event is capturing remains an open question.

Download or read book The Performance of Stocks that are Reverse Split written by Terrence F. Martell and published by . This book was released on 2010 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: An unusually high number of Nasdaq National Market stocks were reverse split following the decline in Nasdaq prices in the year 2000. We test whether these splits were driven by the overall market decline. We find that the performance of stocks with reverse splits in poor overall stock market conditions is better (less negative) than that in good market conditions, and that the differences in performance appear three to five months after the split. This suggests that the longer-term outcomes of reverse stock splits are associated with the market environment at the time of the split. In view of this, changes that Nasdaq made to relax some of its listing standards are well justified.

Download or read book Measuring Long run Performance of Common Stocks Following Stock Splits written by Jinho Byun and published by . This book was released on 2000 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Long Run Common Stock Performance After Stock Splits written by Craig G. (Craig Gordon) Dunbar and published by London : Richard Ivey School of Business, University of Western Ontario. This book was released on 1997 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Reexamining the Long Run Stock Split Anomaly Puzzle written by Rodney D. Boehme and published by . This book was released on 2001 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Long-run performance is reexamined following stock splits during 1950 to 2000. Significantly positive and robust equally weighted abnormal returns are documented during the first year following the announcement month; however, significant value weighted long-run abnormal returns are largely confined to the period from 1975 to 1987. When long-run performance is examined following the ex or effective date of stock splits, abnormal returns are insignificant, except for equally weighted portfolios during 1975 to 1987. Further analysis documents that the equally weighted long-run abnormal performance during 1975 to 1987 is strongly correlated with unexpected decreases in post-split systematic risk.

Download or read book Reverse Stock Splits written by Barry Marchman and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: An examination of financial ratios and variables reveals that firms with better sales performance and higher operating-income-to-assets have better ex-date returns. In the long run, firms with lower debt relative to their assets do better after the reverse stock split. Operating income expressed as a percent of assets is also positively related to the 250-day BHRs.

Download or read book Long Run Performance after Stock Splits written by Jinho Byun and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We measure the postsplit performance of 12,747 stock splits from 1927 to 1996 using two methods to measure abnormal returns: size and book-to-market reference portfolios with bootstrapping, and calendar-time abnormal returns combined with factor models. Between 1927 and 1996, neither method applied to splits 25 percent or larger finds performance significantly different from zero. Over selected subperiods, subsamples of 2-1 splits restricted by book-to-market availability requirements display positive abnormal returns using some methods. However, these samples show small or negligible abnormal returns using the calendar-time method. Overall, the stock split evidence against market efficiency is neither pervasive nor compelling.

Download or read book Predicting Stock Splits with the Help of Prior Firm Specific Experiences written by Kevin Krieger and published by . This book was released on 2007 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is evidence of abnormal stock returns at and following stock split announcements. The successful prediction of splits could enhance investor returns, but few studies try to do so. We hypothesize that a neglected aspect of prior prediction studies is companies that previously split with favorable stock market responses are more likely to split again. Firms in industries with a record of favorable post-split performance may also be more likely to split. We find that inclusion of these factors enhances split prediction accuracy. We find that when this factor is included our split prediction model leads to significant abnormal returns.

Download or read book Why Firms Consolidate Their Stocks written by Lihua Jing and published by . This book was released on 2008 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: I use event date methodology to examine the market reaction to reverse stock splits. I find that the abnormal returns around the announcement date are negative both for the whole reverse split sample and for the pure reverse split sample. I conduct a matched sample as the benchmark to valuate the performance of reverse splitting firms. Their firm performance and long run stock performance are documented worse compared with their matched firms. And the reverse splitting firms conducting a capital reduction perform even worse both in the view of announcement effect and of their firm performance. The adjusted trading volume increases considerably after reverse splits. This result partially suggests that reverse stock splits improve the liquidity of the stock. The relative tick size, which affects the transaction cost, decreases significantly after splitting. The relationship between the decision on split factor and the deviation from market-wide average stock price is not statistically significant. Therefore, the result does not support the hypothesis of 'optimal stock price range'

Download or read book An Event Study of Reverse Stock Splits in Hong Kong Market written by Lihua Jing and published by . This book was released on 2014 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: I use event date methodology to examine the market reaction to reverse stock splits in Hong Kong market from 1991 to 2001. I first investigate the prospectuses distributed by reverse-splitting firms. Four major reasons are provided in firms' prospectuses: 1. Reverse splits will reduce transaction costs for dealings in the consolidated shares; 2. Reverse splits will improve the flexibility in pricing new issue when needed; 3. Share consolidation should raise the profile of the company among institutional and international investors; 4. Directors believe there exists a favorable stock price range, and reverse splits are therefore be used to bring the market value of the shares into a range that the firms consider more appropriate. I find that the abnormal returns around the announcement date are negative and small firms have stronger negative reaction. This result is consistent with the event studies in the U.S. market [Lamoureux and Poon (1987), Peterson and Peterson (1992)]. However, this negative response is contrary to the results in Canada where market reacts positively with a cumulative abnormal return of 9.3 percent on the announcement date that is thereafter maintained [Masse et al. (1997)]. No significant market response to the ex-date is observed. The adjusted trading volume increases considerably after reverse splits. This result partially suggests that the reverse stock improve the liquidity of the stock. The majority of the reverse-splitting firms do not change their board lot size after splits, they therefore reduce transacting costs. The relative tick sizes, which also affect the transaction cost, decrease significantly after splitting. My analysis of the cross-sectional distribution of the split factor provides no support for the quot;optimal stock price rangequot; hypothesis. Hence, the reverse stock splits can be viewed as a passive reaction to a decayed firm performance rather than an active means to achieve a specific objective.

Download or read book An examination of stock splits in two essays written by Amy Burnett and published by . This book was released on 1992 with total page 478 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Reverse Splits in International Stock Markets written by Adam Zaremba and published by . This book was released on 2018 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Do firms conducting reverse splits underperform or overperform in the long run? To resolve this question we investigate the long-term returns following more than 5,000 reverse splits conducted in 24 developed equity markets between the years 1990 and 2016. Using the calendar-time portfolio approach, we demonstrate that reverse splits lead to subsequent underperformance, except for microcaps in the sample. This phenomenon is present in all the global regions we examined--North America, Europe, and Asia-Pacific--and is robust to many considerations.

Download or read book The Effect of Stock Splits on Liquidity and Excess Returns written by Patrick J. Dennis and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the influence of firm ownership composition on both the abnormal returns at the announcement of a stock split and liquidity changes following a stock split. We find three results. First, the largest post-split increase in institutional ownership occurs for firms that had low institutional ownership before the split. Second, changes in liquidity are negatively related to the level of institutional ownership before the split. Last, the abnormal return following a split is negatively related to the level of institutional ownership before the split. These findings are important as they shed new light on the source of stock split announcement returns.

Download or read book The Market Reaction to Stock Splits Evidence from India written by Asim Mishra and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Stock splits are a relatively new phenomenon in the Indian context. This paper examines the market effect of stock splits on stock price, return, volatility, and trading volume around the split ex-dates for a sample of stock splits undertaken in the Indian stock market over the period 1999-2005. The traditional view of stock splits as cosmetic transactions that simply divide the same pie into more slices is inconsistent with the significant wealth effect associated with the announcement of a stock split. However, the empirical evidence confirms a negative effect on price and return of stock splits. The overall cumulative abnormal returns after the split are negative. These results suggest that stock splits have induced the market to revise its optimistic valuation about future firm performance, rejecting signaling hypothesis to which splits convey positive information to markets. Hence, stock splits have reduced the wealth of the shareholders. The results also show that presence of a positive effect on volatility and trading volume following the split events, thus suggesting that split events enhance liquidity.

Download or read book On Existence of an optimal Stock Price written by Lifan Wu and published by . This book was released on 1996 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: