Stock splits in a neutral transaction cost environment: Evidence from the Athens Stock Exchange

This paper investigates the value consequences of stock splits in a market where institutional characteristics minimize the effects of price realignment and signaling. We find that despite these market conditions, stock splits by Greek firms produce positive price reaction around the announcement da...

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Bibliographic Details
Published inJournal of multinational financial management Vol. 19; no. 1; pp. 12 - 25
Main Authors Leledakis, George N., Papaioannou, George J., Travlos, Nickolaos G., Tsangarakis, Nickolaos V.
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.02.2009
Elsevier
SeriesJournal of Multinational Financial Management
Subjects
Earnings
Greece
Liquidity
Market analysis
Market reaction
Price level
Signaling
Signalling
Stock exchange
Stock prices
Stock splits
Stock splits Market reaction Liquidity Signaling
Valuation
Liquidity
Signaling
G14
Stock splits
G3
Market reaction
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Summary:This paper investigates the value consequences of stock splits in a market where institutional characteristics minimize the effects of price realignment and signaling. We find that despite these market conditions, stock splits by Greek firms produce positive price reaction around the announcement day. Further, split factors are directly related to pre-split price levels and deviations from average market prices. Splitting firms also realize earnings improvement which is not reversed after the stock split. Consistent with these findings, market reaction is inversely related to the post-split target price and the size of firm. We interpret this as evidence in support, respectively, of the self-selection and “attention-gathering” hypotheses. As reported in other international studies, there is no evidence of liquidity improvement.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:1042-444X
1873-1309
DOI:10.1016/j.mulfin.2008.02.003