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Record Date, When-Issued, and Ex-Date Effects in Stock Splits

Published online by Cambridge University Press:  06 April 2009

Nandkumar Nayar  and
Michael S. Rozeff
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Abstract

Negative abnormal stock returns of about 1% occur near record dates of stock splits. Further, the lower the returns, the more positive are ex-date returns and when-issued premiums. A possible explanation of these related phenomena is that trading hindrances associated with record dates create trading inconvenience that is reflected in lower prices near record dates. In turn, anomalous positive ex-date returns arise in part from the abnormally low prices of unsplit shares caused by the negative record date returns.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 36 , Issue 1 , March 2001 , pp. 119 - 139
Copyright
Copyright © School of Business Administration, University of Washington 2001

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Footnotes

*

Nayar, Finance Division, University of Oklahoma, Norman, OK 73019; Rozeff, School of Management, University at Buffalo, SUNY, Buffalo, NY 14260. Nayar is grateful to the Cooksey Lectureship and the University of Oklahoma Research Council for financial assistance. Scott Etheridge, Sophie He, Alex Lee, Wilson Liu, and Danka Nalbantova provided excellent research assistance. We thank workshop participants at Rensselaer Polytechnic Institute and the University of Oklahoma, Hank Bessembinder, J. Markham Collins, Arnold Cowan, and Ajai singh for comments on the paper. We especially thank Harold Mulherin (the referee) and Paul Malatesta (the editor) for helpful comments.

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