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    Effects of stock splits on securities returns of companies listed in Nairobi Stock Exchange

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    Date
    2010
    Author
    Nkonge, Timothy N
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    Abstract
    Stock splits remain one of the most popular and least understood phenomena in equity markets. At the Nairobi Stock Exchange there is insufficient evidence from prior research of the effects of stock splits on the securities returns. This study sought to establish such effects using pure stock splitting firms. These are firms that only announced stock splits and not mixed with those that announced stock dividends. Prior literature give evidence of event clustering during stock split announcements as firms tend to announce dividends increases alike. To mitigate for possible effect of event clustering on the tests results, control firm approach was employed. This involved selection of a firm which did not perform stock split but with similar characteristics as the sample firm. Such a matching firm was used in place of the sample firm that had simultaneous dividend announcement. The findings of the tests performed reveal that the stock splits signal to the market. The market interpret stock split as good information as returns are observed to increase significantly around the time of stock split announcement.
    URI
    http://erepository.uonbi.ac.ke:8080/handle/123456789/5875
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    • -College of Humanities and Social Sciences (CHSS) [23266]

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