| Summary: | 碩士 === 國立中興大學 === 財務金融系所 === 99 === The existing literature shows that the decision of stock split signals some important message about firm’s future perspective. This study links financial constraints with stock split and tests whether the firms with financial constraints prefer to split their stocks. In addition, this study also analyzes whether firms splitting their stocks would more likely to do so when they have more growth opportunities. To analyze the signaling effect of stock split, we examine the cumulative abnormal returns of the public firms with stock splits from 1992 to 2009.In the study, we utilize t tests, paired t tests, and logistic regressions to find under which conditions firms would like to split and how their market performance would be after the splits. The empirical results show that firms are more likely to split their stock when they have highly financial constraints and more growth opportunity. In particular, when firms have higher increase in their capital expenditure, it would more likely to split. Because the firms with highly financial constraints have substantial increase in cumulative abnormal returns in the short run after stock split, we conclude that stock split is a signal for the firms to convey the information about their level of financial constraints.
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