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Stock Splits in Switzerland: To Signal or Not to Signal?

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  • Roger M. Kunz
  • Sandro Rosa‐Majhensek

Abstract

In Switzerland, the existence of a mandatory minimum par value inhibited many companies from splitting their stocks as they already traded at their minimum par value. These Swiss companies could split their stocks only after the legal minimum par value was lowered in July 1992 and again in May 2001. These two events provide rare opportunities to distinguish between stock splits that signal a permanent increase in stock price and splits that are merely a reaction to a regulatory change and thus have other motives. The significant return differences between the two samples are in line with the hypothesis that splits are a means to send positive signals to the stock market. Furthermore, while trading volumes remained largely unaffected after stock splits, relative tick sizes generally increased after a stock split, and bid‐ask spreads often increased after a stock split.

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  • Roger M. Kunz & Sandro Rosa‐Majhensek, 2008. "Stock Splits in Switzerland: To Signal or Not to Signal?," Financial Management, Financial Management Association International, vol. 37(2), pages 193-226, June.
    • Handle: RePEc:bla:finmgt:v:37:y:2008:i:2:p:193-226
    DOI: 10.1111/j.1755-053X.2008.00010.x
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    References listed on IDEAS

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    3. Han-Ching Huang & Yong-Chern Su & Chun-E Shih, 2015. "Evidence On The Speed Of Convergence To Market Efficiency: Evidence From Stock Spin-Offs," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 9(2), pages 1-8.
    4. Khamis H. Al-Yahyaee, 2014. "Frequency and Motives for Stock Dividends in a Unique Environment," International Review of Finance, International Review of Finance Ltd., vol. 14(2), pages 295-318, June.
    5. Cahit Adaoglu & Meziane Lasfer, 2011. "Why Do Companies Pay Stock Dividends? The Case of Bonus Distributions in an Inflationary Environment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 38(5-6), pages 601-627, June.

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