Impact of Share Splits on Stock Returns: Evidences from India

Abstract

This article empirically examines the impact of stock splits on the price movements and returns of the scrips listed on the stock market in India. The study makes use of the standard event study methodology to measure the significance of unusual yield associated with the event. To calculate the returns, the study employs market model. Also, it uses parametric tests, such as t-statistic, and non-parametric test, such as Corrado Rank Test, Generalized Rank Test and Sign Test, to check the significance and robustness of abnormal return (AR), average AR, and cumulative average AR. Indisputably, the results are somewhat different from the evidences found in developed markets. Mostly in these countries, the event witnesses unusual optimistic yields. The results suggest that there is a positive AR adjacent to the effective day (ED) of the event in the short run. However, in the long run, negative ARs in the post-effective to ED+90 days window is witnessed. Further, the analysis also suggests that share splits do not have a positive influence on the share capital of the investors. The results are based on the 10-days event and 90-days estimation window and are the main limitation of the study. Hence, the windows can be both expanded and reduced to have a better holistic impact analysis of the share splits and stock returns of the selected firms.

Seasoned Equity Offerings and Differences in Share-Price Impact by Firm Categories

“…Information content on that day is higher than on the announcement date. This methodology aligns with previous research (Anderson and Born 1989;Daly et al 2017;Feng et al 2018;Kvamvold and Lindset 2018;Langetieg 1978;Nanda and Ross 2012;Pandow and Butt 2019).…”

Stock splits and reverse splits in the Brazilian capital market

“…It is important to note that the literature on stock splits has primarily focused on developed countries; however, emerging markets have recently gained attention (Pandow and Ganai, 2023;Pandey et al, 2022;Gupta and Arya, 2020;Pandow and Butt, 2019;Bodhanwala, 2015;Charitou et al, 2005;Gorkittisunthorn et al, 2006). Surprisingly, the Brazilian stock market, one of the largest in Latin America (World Bank, 2021), has received relatively little academic attention (Vieira and Procianoy, 2003;Vieira and Becker, 2011;Antônio et al, 2018).…”

Reaksi Pasar atas Pengumuman Stock Split Sebelum dan Selama Pandemi COVID-19

“…Suatu publikasi dalam pasar modal dikatakan mengandung informasi apabila memberikan abnormal return kepada pasar (Pertiwi & Wirama, 2019). Penelitian yang dilakukan oleh Chung et al (2016), Artama & Wirakusuma (2018), How & Tsen (2019), Pandow & Butt (2019), Wahyudi & Putra (2020) menyatakan pasar bereaksi atas adanya peristiwa stock split.…”