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Are Stock Splits Credible Signals? Evidence from Short-Interest Data

Padma Kadiyala and Michael R. Vetsuypens
Financial Management
Vol. 31, No. 1 (Spring, 2002), pp. 31-49
Published by: Wiley on behalf of the Financial Management Association International
Stable URL: http://www.jstor.org/stable/3666320
Page Count: 19
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Are Stock Splits Credible Signals? Evidence from Short-Interest Data
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Abstract

We propose the change in short interest as a new metric of the signaling strength of a corporate event. If an event signals positive information, short interest should decline at the event announcement. We study short interest around stock split announcements made by NYSE firms during 1990-94. Short interest does not decline around stock splits, which suggests that the typical split does not convey a positive signal. However, short interest declines for the subset of the sample characterized by favorable industry-adjusted pre-split performance. Short interest increases significantly for firms that experience post-split liquidity improvements.

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