English, Article edition: THE MARKET REACTION TO STOCK SPLITS â EVIDENCE FROM INDIA A. K. MISHRA

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Physical Description
  • article
Language
  • English

Edition details

Title
  • THE MARKET REACTION TO STOCK SPLITS â EVIDENCE FROM INDIA
Author
  • A. K. MISHRA
Physical Description
  • article
Notes
  • 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 1999â2005.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.
  • Stock splits, India, split announcements, signaling hypothesis, liquidity hypothesis, trading volume
  • RePEc:wsi:ijtafx:v:10:y:2007:i:02:p:251-271
Language
  • English
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