Stock-split ex-dates: Evidence from the Spanish stock market

This paper examines the empirical behaviour of share prices around the dates of splits, with a view to detecting the possible creation of anomalous returns. It also examines the determining factors of splits, their effects on liquidity and the influence of the market's microstructure in the generating of abnormal returns. The evidence obtained from the Spanish capital market indicates that splits generate an average abnormal return of about 1%, principally on the day that the split is effected. This result cannot be explained by an increase in liquidity. It suggests, rather, that certain microstructure phenomena in the market encourage an increase in abnormal returns. Approximately half of these increased returns could be attributed to two factors: changes in the order flow and an increase in the relative spread, induced by an uneven increase in the ask price with respect to the bid.