Disentangling the Dividend Information in Splits: A Decomposition Using Conditional Event-Study Methods

Subhankar Nayak; Nagpurnanand Prabhala

doi:10.1093/rfs/14.4.1083

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Disentangling the Dividend Information in Splits: A Decomposition Using Conditional Event-Study Methods

Subhankar Nayak¹; Nagpurnanand Prabhala²

¹ Georgia Institute of Technology · ² University of Maryland, College Park

Review of Financial Studies 2001

While folklore in finance holds that split valuation effects are due to dividend increases associated with splits, little is known about magnitudes of dividend and nondividend components of split announcement effects. We find that splits and dividends are indeed informational substitutes, a notion we characterize more precisely, but a significant portion of split valuation effects, 46% according to our estimates, cannot be attributed to dividend information in splits. Our techniques extend the literature on conditional event-study methods and we illustrate their practical value in testing hypotheses and analyzing data not amenable to analysis by standard procedures.

DOI: 10.1093/rfs/14.4.1083
Volume: 14 (4)
Pages: 1083-1116
Language: en
Export: BibTeX
Sources: openalex crossref