A behavioral signaling explanation for stock splits: Evidence from China

• Main Authors: CUI, Chenyu, LI, Frank Weikai, PANG, Jiaren, XIE, Deren
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Stock split; behavioral signaling; nominal price illusion; loss aversion; Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6559; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7558/viewcontent/SSRN_id3541201.pdf
• Institution: Singapore Management University

We propose a behavioral signaling explanation for the positive announcement effects of stock splits. There are two key behavioral ingredients in our model. First, (retail) investors have misconceptions about stock splits that make them view stock splits as good news. Second, investors are loss-avers...