Institutional ownership around stock splits

Fengyu Li, Mark H. Liu, Yongdong (Eric) Shi

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


Studies on the underlying reasons for stock splits can be broadly categorized into two groups: those argue that firms use stock splits to signal favorable private information to the market and those argue that stock splits are used to improve liquidity. We shed light on this issue by examining the change in institutional holdings around stock splits and find that institutional investors, especially short-term investors, increase their holding of the splitting firm's stock. The change in short-term institutional ownership is positively related to the improvement in firm's information environment, especially for less liquid stocks and stocks that are not widely held by institutional investors. Our evidence supports the liquidity hypothesis instead of the signaling hypothesis of stock splits.

Original languageEnglish
Pages (from-to)14-40
Number of pages27
JournalPacific Basin Finance Journal
StatePublished - Dec 2017

Bibliographical note

Funding Information:
We thank Alice Bonaime, Tom Chemmanur, Paul Childs, Chris Clifford, Kristine Hankins, Hui He, Brad Jordan, Susan Jordan, Dong Lee, Don Mullineaux, and seminar participants at Dongbei University of Finance and Economics and University of Kentucky for helpful comments. We appreciate the financial support of the Fundamental Research Funds for the National Natural Science Foundation of China [Grant Nos. 71471031 , 71171036 ], the major project of the National Social Science Foundation of China [Grant No. 14AZD089 ], Distinguished Professor Support Plan of Liaoning Province [Grant No. [2013] 204 ], the Humanity and Social Science Foundation of Ministry of Education of China [Grant No. 15YJA790092 ; 15YJC790041 ], Social Science Planning Key Project of Liaoning Province [Grant No. L15AGL003 ], the Humanity and Social Science Foundation of Department of Education of Liaoning Province [Grant No. LN2016JD008 , ZJ2013043 ], Youth Scientific Research Personnel Training Project of Dongbei University of Finance & Economics [Grant No. DUFE2015Q08 ]. All errors and omissions are our own.

Publisher Copyright:
© 2017 Elsevier B.V.


  • Idiosyncratic volatility
  • Institutional investors
  • Liquidity
  • Price informativeness
  • Stock splits

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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