A Study on Stock Split Announcements and its Impact on Stock Prices in Colombo Stock Exchange (CSE) of Sri Lanka

Liu Hua; Skanthavarathar Ramesh

Authors

Liu Hua
Skanthavarathar Ramesh

Keywords:

average abnormal returns, cumulative average abnormal returns event study, market efficiency and stock split

Abstract

In Sri Lanka, there is not much evidence linked to stock split announcements and stock prices behaviour available to investors. This study, scrutinizes the stock price response to stock split declaration and a test of market efficiency in Colombo Stock exchange (CSE) by using a sample of 64 events (52 companies) from 14 different sectors of the emerging market during the period 2009 to 2012. Standard event study methodology is employed to find the results. The empirical results show that average abnormal return (1.46%) is statistically significant at 5% level on the stock split announcement day. This study finds that stock splits have a significant signal and information content in the Colombo Stock Exchange (CSE). On average, market positively reacts significantly to the announcement. Further, the large negative cumulative average abnormal return (-6%) is observed during the period of (0, 10). This results support the semi- strong form efficient market hypothesis for the sample companies within the study period since stock prices adjust so fast to public information that investor can not earn an abnormal return by b trading in the stocks following the stock split announcement day.

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How to Cite

A Study on Stock Split Announcements and its Impact on Stock Prices in Colombo Stock Exchange (CSE) of Sri Lanka. (2013). Global Journal of Management and Business Research, 13(17), 25-34. https://journalofbusiness.org/index.php/GJMBR/article/view/

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Author Biographies

Liu Hua

Skanthavrathar Ramesh is a researcher affiliated with the Department of Public Finance and Management at Huazhong University of Science and Technology in China. His work includes a study on stock split announcements and their impact on stock prices in the Colombo Stock Exchange of Sri Lanka. With an h-index of 1 and 18 citations, his research contributes to the understanding of financial market dynamics in emerging economies.

Skanthavarathar Ramesh

Skanthavrathar Ramesh is a researcher affiliated with the Department of Public Finance and Management at Huazhong University of Science and Technology in China. His work includes a study on stock split announcements and their impact on stock prices in the Colombo Stock Exchange of Sri Lanka. With an h-index of 1 and 18 citations, his research contributes to the understanding of financial market dynamics in emerging economies.

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