The effect of large stock split announcements on prices of U.S. high technology stocks

Abstract

An empirical investigation in U.S. technology sector is done in this paper using event study methodology to find out existence of significant abnormal returns surrounding stock split announcements. The average abnormal return was not statistically significant, surrounding stock split announcements over the period 1995 to 2013. Abnormal return was highest on the day following stock split announcement period and then abnormal return dropped significantly every day. The result confirms the rapid adjustment of prices of U.S. high technology stocks to reflect the full effect of the stock split announcements. Most importantly, shareholders value enhances as market react positively for shorter trading days (-5, 0, +5) surrounding stock split announcement.