Abstract
A stock split is when a company’s outstanding shares are divided into multiple shares by issuing more shares to current shareholders without eroding their stake’s value. The company typically takes these actions to increase liquidity and marketability, lower stock prices, attract new investors and so on. The purpose of this study is to examine the impact of stock splits on the stock returns during the study period. Companies listed on the Bombay Stock Exchange (BSE) and those included in the S&P BSE 500 Index are included in the stock split data. The study period covers 14 years, between 2008 and 2021. Market model event study methodology is being employed to analyze the average abnormal returns (AARs), cumulative abnormal returns (CARs) and cumulative AAR (CAARs) using an event window period consisting of 31 days (−15,+15). The study is largely based on secondary information from the CMIE Prowess IQ Database and the official BSE website. The t-test, mean and standard deviation were used to investigate the influence of stock split announcements on share prices and the performance of stock splits before and after the announcement. The study found that on (t−13), (t−7), (t−2) and (t−3) and on the day of the announcement (t0), the market reacted favorably with significant positive abnormal returns. On (t+1) and (t+10) days, however, there were significant negative abnormal returns. The null hypothesis is accepted as the CAR for the whole 31-day event window, which is 0.0221, with a t-statistic of 1.692, which is insignificant.