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Three Essays On Splits, Insiders, And Retail Traders, Paul Van Nes

Theses and Dissertations (Comprehensive)

The first essay tests the split signaling hypothesis by examining the reaction of sophisticated investors to stock split announcements. Return-based tests of signaling used in earlier studies produce conflicting results and have been criticized as unreliable. I bypass this criticism by focusing on long-term post-split behavior of short sellers who are generally recognized as sophisticated investors. Upon controlling for alternative hypotheses and conventional short selling determinants, I show that short interest permanently declines in reaction to split announcements. Furthermore, consistent with signaling, the degree of the decline is positively related to signal strength and to the splitter’s level of information …