Tekijä: | Lin, J-C. Singh, A. K. Yu, W. |
Otsikko: | Stock splits, trading continuity, and the cost of equity capital |
Lehti: | Journal of Financial Economics
2009 : SEP, VOL 93:3, p. 474-489 |
Asiasana: | stock splits trading liquidity risk capital costs |
Kieli: | eng |
Tiivistelmä: | The authors of this article argue that stock splits are used in order to attract uninformed trading, which in turn enables market makers to provide lower cost liquidity services. This increases investor's trading propensity and liquidity. Analysis of a sample of stock splits reveals that the splits decrease liquidity risk. This indicates that there is a decline in latent trading costs and cost of equity capital. The improvements of liquidity levels and risks have a positive effect on split announcement returns. The article shows how companies can benefit from split stocks with liquidity improvements. |
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