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The Effects of Reverse Splits on the Liquidity of the Stock

Published online by Cambridge University Press:  06 April 2009

Ki C. Han
Ki C. Han
Affiliation:
School of Management, Suffolk University, 8 Ashburton Place, Boston, MA 02108.
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Abstract

This study investigates the liquidity effects of reverse stock splits using bid-ask spread, trading volume, and the number of nontrading days as proxies for the liquidity of the stock. Results indicate a decrease in bid-ask spread and an increase in trading volume after reverse splits. More importantly, the number of nontrading days significantly declines following reverse splits. For the control group, however, no such changes are observed. These results suggest that reverse splits enhance the liquidity of the stock.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 30 , Issue 1 , March 1995 , pp. 159 - 169
Copyright
Copyright © School of Business Administration, University of Washington 1995

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