FINANCIAL CHARACTERISTICS RELATED TO MANAGEMENTS'STOCK SPLIT AND STOCK DIVIDEND DECISIONS

Abstract

Several studies have made inquiries of corporate managers concerning their motivations for undertaking stock splits and stock dividends. This paper investigates whether the factors identified by these studies are in fact associated with the actual stock distribution decisions of managers. The results are consistent with the view that managements issue large stock distributions (25 per cent or greater) in order to keep the per share price in an optimal range and to signal optimistic expectations to the market. Firms with relatively low per share prices were inclined to issue small stock distributions (less than 25 per cent); the signaling motivation also played a role here.

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