Market Reactions to Stock Splits: An analysis based on data from Copenhagen Stock Exchange

Camilla Frisch Haurdahl

Student thesis: Master thesis


This thesis analyzes market reactions to stock splits on the Danish Stock Market. The data used in the analysis is from the Copenhagen Stock Exchange and the time period is from 2009 to 2014. The analyzed market reactions take inspiration from the Signaling Hypothesis and the Liquidity Hypothesis. The thesis is roughly divided into a presentation of the data, an analysis of abnormal returns around the announcement -and the execution date of stock splits and a liquidity analysis. The findings in the presentation of the data suggest that the number of stock splits in Denmark is declining. A comparison of the number of stock splits from 1995 to 2002 with the current data shows a decrease in the average number of stock splits from 8.5 stock splits per year in 1995 to 2002 to 1.8 stock splits per year in the period from 2009 to 2014. The analysis of the abnormal return shows some statistically significant results for individual stocks, but when aggregating the results over time and across all stock splitting companies, the results become statistically insignificant which leads to the conclusion that the Danish Stock Market is somewhat blurred and that abnormal returns are not always present on the Danish Stock Market around announcement dates and execution dates of a stock split. From interviews with the stock splitting companies in 2009 to 2014, it seems that the stock split reasons were mainly to improve the liquidity of the stock. However, the results from the liquidity analysis show that the liquidity has not improved significantly after the stock splits. The findings from the analyses indicate that more in-debt knowledge about the stock splitting companies is needed in order to gain a profit from speculating in stock splits on the Danish Stock Market.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2014
Number of pages98