The effect of split announcements on Canadian stocks

The stock market reaction to stock dividends in Nigeria and their information content

“…The results of their studies are similar to those reported by FFJR (1969) and support the notion that share prices react to stock dividend announcements (see Woolridge, 1983;Grinblatt et al, 1984;Lamoureux and Poon, 1987;Doran and Nachtmann, 1988;McNichols and Dravid, 1990;Banker, Das and Dater, 1993;Aydogan and Muradoglu, 1998;Olowe, 1998;Anderson, Cahan and Rose, 2001;Elfakhani and Lung, 2003;Balachandran, Faff and Tanner, 2004;Farinha and Basilio, 2006;Leung, Rui and Wang, 2006;Lyroudi and Dasilas, 2006;Bechmann and Raaballe, 2007;and Dhar and Chhaochharia, 2008). [1] Despite this weight of evidence, a non-US study covering the period 1981-94 by Papaionnou, Travlos and Tsangarakis (2000) on the share price reaction to stock dividends in Greece did not find any evidence in support of a share price reaction.…”

“…Lack of evidence for the liquidity hypothesis is also reported in Bechmann and Raaballe (2007) for Danish stocks. In contrast, however, a study of Canadian stock splits between 1973 and 1992 by Elfakhani and Lung (2003) found that both trading volumes and earnings increased, post split, and a study by Lyroudi and Dasilas (2006) The 'normal trading range' hypothesis suggests that because stock dividends and stock splits engineer a decrease in the stock price, it falls into an optimal trading range that results in an expansion of the investor base and hence a positive re-evaluation of the stock. Several studies, including those of Lakonishok and Lev (1987), McNichols and Dravid (1990), and Ikenberry et al (1996) find that stock splits and stock dividends follow stock price run-ups that push share prices above the normal range for peer groups.…”

Stock split size, signaling and earnings management: Evidence from the Spanish market

“…The negative relationship between split frequency and market reaction is consistent with the results of Pilotte & Manuel (1996) and Elfkahani & Lung (2003), and suggests that the firm's first split could contain more information than later splits.…”

Insider ownership, bid–ask spread, and stock splits: Evidence from the Stock Exchange of Thailand

“…Reducing the share price further attracts more investors, especially small ones, broadening the ownership of the firm's shares and thus improving stock liquidity. Several studies provide empirical support to the liquidity hypothesis (Elfakhani & Lung, 2003;Muscarella & Vetsuypens, 1996;Wulff, 2002). On the other hand, several studies conclude that stock liquidity did not change or even declined after stock splits (Conroy, Harris, & Benet, 1990;Copeland, 1979;Lakonishok & Lev, 1987;Lamoureux & Poon, 1987;Murray, 1985).…”

“…These variables are also employed by Conroy et al (1990) and Elfakhani and Lung (2003) as proxies of stock liquidity. Bid-ask spread is calculated as the closing bid price minus the closing ask price.…”