Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
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Stock Splits and Trading Behavior of Investors

주식분할과 투자자 매매행태

  • Park, Jin-Woo (Department of Business Adminstration, Hankuk University of Foreign Studies) ;
  • Lee, Min-Gyo (Department of Business Adminstration, Hankuk University of Foreign Studies)
  • 박진우 (한국외국어대학교 경영학과) ;
  • 이민교 (한국외국어대학교 경영학과 대학원)
  • Received : 2020.11.30
  • Accepted : 2020.12.21
  • Published : 2020.12.30
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Abstract

Purpose - This study examines the information effect and trading behavior of investors for the 430 stock split data from January 2004 to June 2018 in the Korean stock market. Design/methodology/approach - The stock split samples are classified into two groups by split ratio as well as three groups by price level prior to split. We also investigate the trading behavior of investors categorized by institutional versus individual investors. Findings - First, we find a significantly positive information effect on the announcement day. In particular, the information effect is more distinct in the group of larger split ratio and higher price level of stocks. Second, we find a huge increase in turnover following the stock splits, which mainly results from the trading by individual investors. Also, the increase in turnover by individual investors is evident in the group of larger split ratio and higher price level of stocks. Third, the stock splits have a negative impact on the long-term stock performance. The negative buy-and-hold abnormal return(BHAR) makes no difference in the groups by split ratio as well as price level of stocks. Lastly, we find individual investors tend to buy splitted stocks, which exhibit the long-term under-performance. Research implications or Originality - The results in this paper suggest that the liquidity hypothesis is not supported in the Korean stock splits. In addition, we observe that individual investors are exposed to losses due to their unfavorable trading behavior following the stock split.

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