Home / Regular Issue / JSSH Vol. 28 (2) Jun. 2020 / JSSH(S)-1168-20

 

Determinants of Stock Splits’ Ex-Date Returns: Empirical Evidence from Indonesian Stock Market

Edwin Hendra, Bambang Leo Handoko and Stefanus Ariyanto

Pertanika Journal of Social Science and Humanities, Volume 28, Issue 2, June 2020

Keywords: Event study, market reaction, stock split

Published on: 26 June 2020

This study analyzes the stock returns on the days surrounding stock split events to find whether there are price movement anomalies during the split event of Indonesian public companies and whether they follow a signalling hypothesis or a trading range/liquidity hypothesis. This study used the stock returns data for 60 days around 50 split events of publicly traded stock on the Indonesia Stock Exchange from 2010 to 2015. This study found an anomaly pattern of stock prices with the ex-date as the peak and a positive average return that could not be explained by the general market movement. The cross-sectional regression of the conservative capital asset pricing model (CAPM) and three other factors failed in explaining the ex-date return anomalies. The results of the empirical model indicate that ex-date return anomalies were not related to a firm’s operating performance but were strongly related to the split factor, weakly related to trading volume, and also weakly related to the market value. Overall, these findings support the trading range/liquidity hypothesis.

ISSN 0128-7702

e-ISSN 2231-8534

Article ID

JSSH(S)-1168-20

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