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Abstract

Stock split in India is an old phenomenon, yet contradictory views exist if stock split generates value to shareholder. This study focuses on 719 stock splits (between the year 2001 and 2013) and its impact on returns, price, trading volume, number of trades, abnormal return (ordinary least squares, OLS) and cumulative average abnormal return. The study also tries to establish if there is a significant difference in the reaction to stock splits among different categories of Bombay Stock Exchange (BSE categorization). The study tests out how splits are perceived and measured, if there are abnormal returns around the ex-date and does the trading in those stocks get impacted with more number of shares available at lesser price, and how efficient are our market in adjusting to the post-split.

Keywords

Stock split abnormal returns cumulative average abnormal return market efficiency signalling theory

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Stock Split: A Test of Market Efficiency on Indian Stocks (2001–2013)

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Keywords

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