The liquidity effects of stock splits

The main purpose of the present study is to investigate the liquidity effects of stock splits on the Finnish stock market. The sample of splitting firms consists of Finnish publicly listed firms implementing stock splits during the period from 1994 to 2003. The sample includes 43 stock split events. In the theoretical part of the study the theoretical background of share distributions is presented. In addition, the existing proxies for liquidity are presented, and relative merits and implications of different measures that have been used for measurement of stock market liquidity are discussed. The empirical part of the study is carried out by the event-study methodology. The liquidity effects are investigated by using the proportional bid-ask spread, the split-adjusted number of shares traded and the percentage of days with trades as proxies for liquidity. The statistical significance of changes in liquidity variables is examined using time-series and cross-sectional t-statistics. The results of the study show that the proportional bid-ask spread decreases following the stock split, although the change is not significant. The split-adjusted number of shares traded does not significantly change subsequent to a split. Further, the percentage of days with trades had a significant positive shift during the post-split period. Although it is not possible to draw strong conclusions from the results, the empirical evidence of this study indicates that the liquidity is rather improved than weakened after the stock split in Finland.fi=Kokotekstiversiota ei ole saatavissa.|en=Fulltext not available.|sv=Fulltext ej tillgänglig