ABSTRACT
This chapter suggests that the level of insider ownership should have an impact on the market reaction to stock split announcements. It describes the data sample and methodology. The chapter investigates the market response to split announcements, and the association between the market response and the level of insider ownership. It discusses other important factors and then conducts a cross-sectional regression, with the other factors controlled. Stock splits are identified from the Center for Research in Security Prices New York Stock Exchange/American Stock Exchange File. To avoid obscuring ex-date effects on the announcement return, stock splits are excluded when the period between the announcement date and the ex-date is less than six trading days. Maureen McNichols and Ajay Dravid empirically find that split factor is positively related to stock returns on the announcement date. Therefore, the relationship between the abnormal returns and insider ownership might be attributable to the effect of split factor.
