The effect of Canadian stock splits, stock dividends, and reverse splits on the value of the firm

Abstract

This study uses event date methodology to examine the market reaction to Canadian stock splits, reverse splits and stock dividends. The positive stock market response in Canada to regular stock splits and to stock dividends is consistent with U.S. findings. The positive response to reverse splits, however, contrasts sharply with the negative response found in U.S. studies. Our results support the hypothesis that reverse splits are a positive rather than a negative signal.

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