ABNORMAL RETURN ON STOCK SPLIT - REVISITING THE EVIDENCE OF THAILAND DURING 2009 - 2018
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Abstract
An abnormal return on the stock split is one of the most prominent debates in the finance industry. Positive signaling and optimal trading range hypotheses are underlying principles that are commonly used to describe a positive market reaction to the stock split. This research paper focuses specifically on the market’s reactions by the announcement date of the stock split, applying firm size and price range to explore insightful connections. The samples are listed companies in the Stock Exchange of Thailand (MAI excluded) with a stock split from January 1, 2009, to December 31, 2018, aiming to capture data in all economic cycles. To examine positive abnormal returns around announcement date, the event-study-methodology is applied. The study indicates that average abnormal return (AAR) and cumulative average abnormal return (CAAR) are significantly positive during the announcement. Applying firm size in the study, the market tends to react more positively to small-size firms, likewise, lowprice. The pieces of evidence indicated that stocks responded more positively by reason of consciously or subconsciously anticipation to post-splits. The investors are able to apply the rationales and logic behind this corporate action to distinguish between fundamental changes and expectations for their investment decisions in financial markets.
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