Stock splits: Signaling or liquidity? The case of ADR 'solo-splits'

Chris J. Muscarella, Michael R. Vetsuypens

Research output: Contribution to journalArticle

85 Citations (Scopus)

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.

Original languageEnglish (US)
Pages (from-to)3-26
Number of pages24
JournalJournal of Financial Economics
Volume42
Issue number1
DOIs
StatePublished - Jan 1 1996

Fingerprint

American depositary receipts
Stock splits
Liquidity
Capital markets
Firm value
Announcement effect
Stock prices
Announcement
Home country

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Cite this

Muscarella, Chris J. ; Vetsuypens, Michael R. / Stock splits : Signaling or liquidity? The case of ADR 'solo-splits'. In: Journal of Financial Economics. 1996 ; Vol. 42, No. 1. pp. 3-26.
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Stock splits : Signaling or liquidity? The case of ADR 'solo-splits'. / Muscarella, Chris J.; Vetsuypens, Michael R.

In: Journal of Financial Economics, Vol. 42, No. 1, 01.01.1996, p. 3-26.

Research output: Contribution to journalArticle

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