Professor of Finance Hoang Nguyen has co-authored a paper titled "Stock Splits Puzzle: An Additional Answer From Pre-Split Earnings Announcements."
In the study, Dr. Nguyen and his colleagues explored whether companies split their stock to subtly to share good news with investors. The researchers think that if stock splits are a way for managers to signal positive information, then the stock's performance after the split should be connected to how the company performed and what they said in their earnings reports before the split.
Their research shows exactly that: If a company's stock did well in the five days surrounding their last earnings report before the split, then the stock also tends to do well after the split, and the company's profits also tend to grow. This connection remains even when the researchers account for other factors that influence stock price, like the company's size, its value, and recent stock trends.
Essentially, this study provides more evidence that stock splits might be a way for companies to send a positive signal to the market.
Citation: Nguyen, Hoang Huy, et al. 鈥淪tock Splits Puzzle: An Additional Answer From Pre鈥怱plit Earnings Announcements.鈥� Journal of Corporate Accounting & Finance, Sept. 2024,