What do stock splits really signal?

David L. Ikenberry, Graeme Rankine, Earl K. Stice

    Research output: Contribution to journalArticle

    164 Citations (Scopus)

    Abstract

    We observe significant post-split excess returns of 7.93 percent in the first year and 12.15 percent in the first three years for a sample of 1,275 two-for-one stock splits. These excess returns follow an announcement return of 3.38 percent, indicating that the market underreacts to split announcements. The evidence suggests that splits realign prices to a lower trading range, but managers self-select by conditioning the decision to split on expected future performance. Presplit runup and post-split excess returns are inversely related, indicating that our results are not caused by momentum.

    Original languageEnglish (US)
    Pages (from-to)357-375
    Number of pages19
    JournalJournal of Financial and Quantitative Analysis
    Volume31
    Issue number3
    StatePublished - Sep 1996

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    Stock splits
    Excess returns
    Announcement returns
    Conditioning
    Announcement
    Momentum
    Managers

    ASJC Scopus subject areas

    • Accounting
    • Economics and Econometrics
    • Finance

    Cite this

    What do stock splits really signal? / Ikenberry, David L.; Rankine, Graeme; Stice, Earl K.

    In: Journal of Financial and Quantitative Analysis, Vol. 31, No. 3, 09.1996, p. 357-375.

    Research output: Contribution to journalArticle

    Ikenberry, DL, Rankine, G & Stice, EK 1996, 'What do stock splits really signal?', Journal of Financial and Quantitative Analysis, vol. 31, no. 3, pp. 357-375.
    Ikenberry, David L. ; Rankine, Graeme ; Stice, Earl K. / What do stock splits really signal?. In: Journal of Financial and Quantitative Analysis. 1996 ; Vol. 31, No. 3. pp. 357-375.
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