The Market Reaction to the Choice of Accounting Method for Stock Splits and Large Stock Dividends
Written by Paula Widiastuti, SE, MSM on 8/26/2008by. Graeme Rankine; Earl K. Stice
Prior research has used inaccurate classification rules to distinguish between stock splits and stock dividends. The CRSP classification of two-for-one stock distributions agrees with the actual accounting treatment only 23% of the time. In addition, the accounting treatment impacts the announcement period reaction-two for one distributions accounted for as stock dividends are associated with five-day announcement period returns of 2,70%, significantly greater that the 0,93% announcement returns for distributions accounted for as stock splits. Announcement returns are posi....
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