Stock split versus bonus issue as predictor of firms' profitability and market ratios: An empirical analysis

• Main Authors: Caballero, Cedric Royce F., Chua, Kelvin Ronald S., III, Lee, Aldrich Angelo F., Mercado, Francisco A., III
• Format: text
• Language: English
• Published: Animo Repository 2012
• Subjects: Imaginary organizations; Accounting
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/11595
• Institution: De La Salle University

The present study was made with the goal to determine which between bonus issues and stock splits is the better predictor of firms' performance. Both are called fictitious corporate actions in the sense that there are no direct benefits derived from such actions, yet past studies have shown that there are significant differences in the operating performance and stock prices of such firms. And so in this particular study, the researchers explored the effects of such corporate actions to the firms, in conjunction with the respective profitability ratios among all publicly listed companies in the Philippines during the time span of 2006 to 2010. To accomplish this, the researchers made use of panel data regression with bonus issues and stocks splits, as independent variables and profitability ratios as dependent variables to put an emphasis on the relationship and impact of the independent variables on a firms' performance. The study yielded the result that stock split is the better predictor of firms' performance compared to bonus issue. Also, the study determined that stock splits have a negatively proportional relationship with ROE and NPM, and a positively proportional relationship with ROA. Similarly, bonus issues have a negatively proportional relationship with ROE, ROA, and NPM. This research primarily benefits investors as it could be used to enhance their understanding of the Philippine stock market since past studies are focused on other countries with different market and legal structures, such as in the U.S. and Germany. Such empirical studies also served as a limitation because of the lack of past research in the local setting, thus the researchers were confined to the case studies in foreign countries.