Analysing the Likelihood of and Market Reaction to Reverse Stock Splits in India

IF 2.3 Q3 BUSINESS Global Business Review Pub Date : 2023-09-18 DOI:10.1177/09721509231189916
Reena Nayyar, Sanjay Dhamija, Chhavi Mehta
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Abstract

The study analysed the factors that motivated Indian companies to pursue reverse stock splits strategy. The article also aimed at examining the market reaction around the announcement and effective dates of reverse stock splits. Analysing the reverse stock splits pursued by Indian companies during the period 2002–2022, it was found that poor growth opportunities in the past were the main reasons for Indian companies pursuing reverse stock splits. Further, reverse stock splits were chosen by the companies whose stocks were trading as penny stocks, in the pre-split period. Here, the motivation was to improve the image of their stocks amongst the institutional investors. Realizing these value-improving motives on part of the companies adopting reverse stock splits, the market participants reacted positively to the news of reverse stock splits on the announcement as well as the effective date. Thus, the study supported positive signalling theory and image improvement theory as the rationales for Indian companies pursuing reverse stock splits and the resultant positive market reaction.
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分析印度股票反向拆分的可能性和市场反应
该研究分析了促使印度公司采取反向股票分割策略的因素。本文还旨在研究市场对股票反向拆分公告和生效日期的反应。分析印度公司在2002-2022年期间追求的反向股票分割,发现过去糟糕的增长机会是印度公司追求反向股票分割的主要原因。此外,股票在拆分前以低价股交易的公司选择反向股票拆分。在这里,动机是为了改善他们的股票在机构投资者中的形象。市场参与者意识到股票反向拆分公司的这些价值提升动机,对股票反向拆分公告及其生效日期的消息反应积极。因此,本研究支持积极信号理论和形象改善理论作为印度公司进行反向股票分割和由此产生的积极市场反应的依据。
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来源期刊
CiteScore
7.10
自引率
12.50%
发文量
107
期刊介绍: Global Business Review is designed to be a forum for the wider dissemination of current management and business practice and research drawn from around the globe but with an emphasis on Asian and Indian perspectives. An important feature is its cross-cultural and comparative approach. Multidisciplinary in nature and with a strong practical orientation, this refereed journal publishes surveys relating to and report significant developments in management practice drawn from business/commerce, the public and the private sector, and non-profit organisations. The journal also publishes articles which provide practical insights on doing business in India/Asia from local and global and macro and micro perspectives.
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