Impact of Stock Split Announcements on Share Price: A Study of Indian Stock Market

Abstract

The study investigates the impact of stock split announcements on the stock market performance of companies listed in the S&P CNX 500 index. It aims to determine whether such corporate events lead to significant abnormal and cumulative abnormal returns, reflecting investor reactions and market efficiency. Using the event study methodology, the research examines a selected sample of stock split announcements between January 2018 and December 2024. Daily returns were analyzed around the announcement period to assess variations in market behavior. The findings reveal that stock prices tend to experience positive abnormal returns before the official announcement, suggesting that investors anticipate favorable outcomes and respond to market signals in advance. Post-announcement reactions show a minor decline, indicating possible profit-taking behavior. The analysis highlights the presence of information leakage, speculative trading, and market anticipation prior to the event. Overall, the results confirm that stock split announcements have a significant influence on investor sentiment and short-term market movements, reflecting semi-strong form market efficiency in the Indian context.