Journal of Financial Economics Vol. 42 No. 1 1996
Stock splits: Signaling or liquidity? The case of ADR ‘solo-splits’
Abstract
Stock splits should have no effect on firm value in perfect capital markets, yet stock prices increase on split announcements. The two traditional explanations are information signaling and improved liquidity for shares that trade at lower prices. We investigate these explanations by studying splits of American Depositary Receipts (ADRs) that are not associated with splits in their home-country stock, and which represent unique illustrations of the effect of liquidity. We interpret our findings as supportive of the liquidity explanation of stock split announcement effects.
- DOI
- 10.1016/0304-405x(95)00872-c
- Volume
- 42
- Issue
- 1
- Pages
- 3-26
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref