Effects of stock splits on stock returns: An event study of Finnish companies

Abstract

Tämän kandidaatintyön tavoitteena on tutkia osakkeen nimellisarvon jakamisen vaikutusta osakkeen markkina-arvoon Suomessa vuosina 1996-2007. Ilmiötä tarkastellaan tapahtumatutkimusmenetelmän avulla ja lopullinen tutkittavien osakesplittien määrä on 38. Tutkimuksessa ei löydetty epänormaaleja tuottoja splittien julkistushetkellä, joten tämän aineiston mukaan sijoittajat eivät pitäneet sitä johdolta tulevana positiivisena signaalina. Sitä vastoin tutkimuksessa löydettiin positiivinen kurssimuutos niiden osakkeiden kohdalla, jolloin pörssiyhtiö ilmoitti splitin ohella myös osingonjaostaan.

The purpose of this study is to examine the validity of the signaling hypothesis of stock splits in Finnish stock markets. The signaling hypothesis is tested by examining possible abnormal returns around the announcement day of the split. The empirical study is carried out by performing a standard event study methodology. The sample used in the study consists of all the Finnish firms which announced a stock split during the research period. The research period of the study is 12 years (1996-2007) and the number of investigated stocks is 38.This study did not find evidence of the signaling effect of stock splits present in the Finnish stock markets during the time period of 1996-2007. Thus, according to the data investors did not consider stock splits as positive signals from the management. Statistically significant cross-sectional mean abnormal returns are detected only on the announcement date in the sample of 38 splits, which also included companies that announced stock dividends at the same time with stock splits.