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The effects of stock splits on stock liquidity

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  • Gow-Cheng Huang
  • Kartono Liano
  • Ming-Shiun Pan

Abstract

This study examines the effects of stock splits on stock liquidity. We find that most liquidity measures increase substantially around the stock split announcement. After the announcement date, split firms’ liquidity declines, but is still above the pre-split level. However, after the ex-date, the liquidity drops below the pre-split level. Thus, the impact of stock splits on stock liquidity appears to be short-lived. We also find that the change in liquidity can significantly explain the announcement effect, but not the ex-date effect. Overall, our results seem to be more consistent with the signaling hypothesis and/or the attention-grabbing hypothesis than with the improved liquidity hypothesis. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Gow-Cheng Huang & Kartono Liano & Ming-Shiun Pan, 2015. "The effects of stock splits on stock liquidity," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(1), pages 119-135, January.
    • Handle: RePEc:spr:jecfin:v:39:y:2015:i:1:p:119-135
    DOI: 10.1007/s12197-013-9250-6
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    3. Justin Cox & Bonnie Van Ness & Robert Van Ness, 2022. "Stock splits and retail trading," The Financial Review, Eastern Finance Association, vol. 57(4), pages 731-750, November.
    4. Olesya Lobanova & Alexandre Aidov, 2023. "Reverse Stock Splits and Liquidity in ETFs," JRFM, MDPI, vol. 17(1), pages 1-12, December.

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    More about this item

    Keywords

    Stock splits; Liquidity; Signaling; Attention-grabbing; G14; G30;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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