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Record Date, When-Issued, and Ex-DateEffects 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 nearrecord dates of stock splits. Further, the lower thereturns, the more positive are ex-date returns andwhen-issued premiums. A possible explanation ofthese related phenomena is that trading hindrancesassociated with record dates create tradinginconvenience that is reflected in lower prices nearrecord dates. In turn, anomalous positive ex-datereturns arise in part from the abnormally low pricesof unsplit shares caused by the negative record datereturns.

Information

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 andthe University of Oklahoma Research Council forfinancial assistance. Scott Etheridge, Sophie He,Alex Lee, Wilson Liu, and Danka Nalbantovaprovided excellent research assistance. We thankworkshop participants at Rensselaer PolytechnicInstitute and the University of Oklahoma, HankBessembinder, J. Markham Collins, Arnold Cowan,and Ajai singh for comments on the paper. Weespecially thank Harold Mulherin (the referee) andPaul Malatesta (the editor) for helpfulcomments.

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