Despite the rich literature on theories of stock splits, studies have omitted public utility firms from their analysis and only analyzed split by industrial firms when examining managerial motives for splitting their stock. I examine the liquidity-marketability hypothesis, which states that stock splits enhance the attractiveness of shares to individual investors and increase trading volume by adjusting prices to an optimum trading range. Changes in the regulatory process, resulting from EPACT, have opened a window of opportunity for the study and comparison of the two traditional motives for splitting stock --signaling versus liquidity-marketability motives. Public electric utility firms provide a clean testing ground for these two non-mutually exclusive theories as liquidity/marketability hypothesis should dominate before the enactment of the EPACT since the conventional signaling theory of common stock splits should not apply given the low levels of information asymmetry in regulated utility companies. In the post-EPACT period, however, the signaling effect is expected to play a more dominant role. Based on both univariate and multivariate analyses, my results are consistent with the hypothesis posed. For the pre-EPACT period, liquidity motive seems to predominate in explaining the abnormal announcement return of utility stock splits. On the other hand, the results support the signaling motive as a leading explanation of abnormal returns in the post-EPACT period.

The primary purpose of this study is to test the validity of the trading range hypothesis as a basis for stock split decisions of Turkish companies. In the first part, the liquidity effects of stock splits on Turkish stocks are examined. Second, the optimal trading ranges for different-sized firms and firms with different investor bases are determined. Finally, the main empirical question of the study is analyzed by testing whether or not Turkish firms whose share prices rise above their optimal trading ranges are more likely to split their stock compared to firms whose share prices are at or below their optimal trading ranges. The empirical findings about the level of liquidity indicate that there is a slight decline in liquidity in the post-split periods. Analysis of the relationship between firm characteristics and share prices shows that firm size has a positive effect on share prices. The effect of investor base on share prices could not be identified. Finally, the estimation of the logit model utilized in the study to determine the probability of firms to split does not reveal any statistically significant result.

A survey is conducted through an event study on the Stockholm Stock Exchange based on 119 historical stocks splits with a split factor of at least two, for the years between 1997 and 2012. This study has tested if there is an increase in return variance and systematic risk followed by a stock split. This is a quantitative study with the deductive approach and the positivistic epistemological standpoint. By matching 8925 squared daily returns for 75 days of pre- and post- split data, the sample of stock splits showed an increased return variance 0.515 of the matched squared daily returns, this number is significant at the 1% level in our binomial z-statistics. If the returns are compared on a 15 week interval instead of 75 days, the change in variance disappears; this confirms Dubofsky (1991) findings. When 52 weeks of pre- and post- split data is used, there is an increased variance in a proportion if 0.55 of the 6186 matched observations, this proportion is far greater than our daily sample and tells us that there is a long term effect on the return variance. The systematic risk measured as beta derived from the CAPM, did not show any increase in any of the three different time periods (75days, 16weeks and 52 weeks); the results confirms Wiggins (1992) findings; beta changes are just illusory.  The results suggest that there is an average increase in returns variance in the short and long term after a stock split, that confirms some existing studies by Ohlson and Penman (1985) and Dubofsky (1991). The increase in returns variance can be viewed as the management’s success of signaling the market, enhancing liquidity and reducing information asymmetry without any additional cost of capital. Our findings also contradict the theory of economic irrelevance of shares outstanding. This study is expanding Ohlson and Penman (1985) and Dubofsky (1991) studies, on a European stock market.

No description available.

Throughout history stock splits have only been seen as a cosmetic change on how a firm express its market value of equity. This study investigates if abnormal return occurs in connection with stock split announcements on Nasdaq Stockholm and how the variations may be explained by selected factors. An event study is performed on 83 stock splits during the time period 2010-2020 to establish if abnormal return is present. With a multivariate linear regression, split quota, firm size and trading volume are the selected factors which may explain the variations in abnormal return. The results from the event study establish abnormal return one day prior to the announcement and the event day itself. Further, the regression confirms at a statistically significant level the negative relationship between firm size and abnormal return. For trading volume, the regression finds no statistically significant result and thereby it does not explain the variations in abnormal return. As for split quota, no conclusion can be drawn whether it affects abnormal return or not. The study concludes the occurrence of abnormal return in connection with stock split announcements on Nasdaq Stockholm and firm size as one of the factors explaining the variations.

Submitted by Cristiane Shirayama (cristiane.shirayama@fgv.br) on 2011-06-02T18:28:22Z No. of bitstreams: 1 66070100195.pdf: 1353793 bytes, checksum: a50ab2b0ae0c20bf56ebe00e51c01065 (MD5) / Approved for entry into archive by Vera Lúcia Mourão(vera.mourao@fgv.br) on 2011-06-02T20:11:06Z (GMT) No. of bitstreams: 1 66070100195.pdf: 1353793 bytes, checksum: a50ab2b0ae0c20bf56ebe00e51c01065 (MD5) / Approved for entry into archive by Vera Lúcia Mourão(vera.mourao@fgv.br) on 2011-06-02T20:32:19Z (GMT) No. of bitstreams: 1 66070100195.pdf: 1353793 bytes, checksum: a50ab2b0ae0c20bf56ebe00e51c01065 (MD5) / Made available in DSpace on 2011-06-03T17:29:43Z (GMT). No. of bitstreams: 1 66070100195.pdf: 1353793 bytes, checksum: a50ab2b0ae0c20bf56ebe00e51c01065 (MD5) Previous issue date: 2010-04-20 / The purpose of this study is to analyze the nominal price evolution of listed companies and confirm whether the nominal price puzzle can be seen in the Brazilian capital markets. The nominal prices of sampled shares have not followed the positive evolution of the São Paulo Stock Exchange Index (IBOVESPA) during the analyzed period, given that share prices were controlled by a series of stock splits and share dividends. From the evidences of the nominal price puzzle in Brazil, this study sought to understand managers’ motivations to make such decisions to control nominal prices. The methodology applied in this study consists of creating portfolio of shares based on nominal prices and analyzing the financial returns of those portfolios. This methodology was based on Hwang e Lu (2008), which present that nominal share prices in the United States are relevant and returns are inversely related to nominal share prices. This fact can contribute in the explanation of manager’s motivations to actively control nominal share prices. This relationship between nominal share price and financial returns could not be seen in Brazil. / Este trabalho tem como objetivo analisar a evolução dos preços nominais de ações de empresas brasileiras listadas e verificar se o nominal price puzzle ocorre no mercado acionário brasileiro. Constatou-se que os preços nominais da amostra de ações não vêm acompanhando a evolução positiva do Índice da Bolsa de Valores de São Paulo (IBOVESPA) durante o período analisado, uma vez que os preços das ações sofreram influência de certos mecanismos de controle, como por exemplo, desdobramento e bonificações de ações. A partir dos indícios do nominal price puzzle, buscou-se entender as motivações que levam as empresas brasileiras a controlarem os preços nominais de suas ações. A metodologia aplicada nesse estudo consiste na formação de carteiras de ações a partir do critério de preços nominais e análise dos retornos dessas carteiras. Essa metodologia foi baseada no trabalho de Hwang e Lu (2008), que mostram que o preço das ações no mercado acionário americano em termos nominais é relevante, e os retornos obtidos com ações são inversamente relacionados com os preços nominais das mesmas. Esse fato pode contribuir na explicação da motivação para os administradores optarem por controlar os preços das ações. No Brasil, essa relação inversa entre preço nominal e retorno não pode ser verificada.