Stock splits: Signaling or liquidity? The case of ADR 'solo-splits'

Chris J. Muscarella, Michael R. Vetsuypens

Research output: Contribution to journalArticlepeer-review

99 Scopus citations


Stock splits should have no effect on firm value in perfect capital markets, yet stock prices increase on split announcements. The two traditional explanations are information signaling and improved liquidity for shares that trade at lower prices. We investigate these explanations by studying splits of American Depositary Receipts (ADRs) that are not associated with splits in their home-country stock, and which represent unique illustrations of the effect of liquidity. We interpret our findings as supportive of the liquidity explanation of stock split announcement effects.

Original languageEnglish (US)
Pages (from-to)3-26
Number of pages24
JournalJournal of Financial Economics
Issue number1
StatePublished - Jan 1 1996

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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