Further evidence on managerial motives for stock splits

1993-06-22articleQuarterly journal of business and economics87 citationsclosed

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Corporate Finance and Governance Financial Markets and Investment Strategies Financial Analysis and Corporate Governance

Abstract

This field research study uses the responses from a 1991 mail survey to examine managerial motives for issuing stock splits. The sample consists of 251 NYSE and AMEX firms that issued stock splits of at least 25 percent between January 1, 1987 and December 31, 1990. Based on survey data from 136 responding firms, the evidence suggests that the main motive of a split is moving the stock price into a better trading range, followed by improving trading liquidity. The results also show that the mean preferred trading range of stock split firms is from $20 to $35, but differs between firms with small (< 2-for-l) versus large (22-for-l) stock splits.

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References

2003The Adjustment of Stock Prices to New Information

1984The valuation effects of stock splits and stock dividends

1991Stock Prices and the Supply of Information

1987Stock Splits and Stock Dividends: Why, Who, and When

1987The Market Reaction to Stock Splits

1990Stock Dividends, Stock Splits, and Signaling

1979Liquidity Changes Following Stock Splits

1988Stock splits, stock prices, and transaction costs

Cited by

1999Is Share Price Related to Marketability? Evidence from Mutual Fund Share Splits