The effect of stock splits on liquidity and excess returns: Evidence from shareholder ownership composition

We examine the impact of firm ownership composition on both the abnormal returns at the announcement of a stock split and liquidity changes following a stock split. We find three results. First, the largest post-split increase in institutional ownership occurs for firms that had low institutional ownership prior to the split. Second, changes in liquidity are negatively related to the level of institutional ownership prior to the split. Last, the abnormal return following a split is negatively related to the level of institutional ownership prior to the split. These findings are important as they shed new light on the source of stock split announcement returns.