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Why are Stock Splits Declining?
Author(s) -
Minnick Kristina,
Raman Kartik
Publication year - 2013
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12024
Subject(s) - stock (firearms) , equity (law) , economics , demographic economics , business , monetary economics , labour economics , geography , archaeology , political science , law
The percentage of firms undertaking stock splits has fallen from a peak of 23% in 1982 to less than 1% in 2009. Controlling for time trends and other economic determinants, the declining incidence of stock splits is significantly associated with a drop in household investors’ equity holdings and with a rise in household income. We also report a decline in the size of split factors that is associated with an increase in institutional ownership of equity and with an increase in household income. Collectively, the evidence is consistent with firms responding rationally to changes in investor characteristics.