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A study on investors' opinion on motives behind stock splits by companies in India.

Introduction

A stock split is the division of a share into two or more parts. Stock split adds no value but increases the number of shares in the ratio of the split. By splitting the share the value of the company will not increase, but the capital is only redistributed by the increased number of shares. According to Lamoureux (1987) "Splits are only cosmetic change, slicing the same pie into smaller pieces but not changing the fractional ownership of the equity interest and votes in the company". The earnings per share will be diluted and the market price per share will fall proportionately with the share split. The total value of the holdings of the share holder remains unaffected with the stock split. In India, SEBI (Securities Exchange Board of India) permitted stock splits in the year 1999 and a lot of companies have split stocks since then. It was Fama et al., (1969) classical paper which gave the signaling and trading range hypotheses as possible reasons for corporates opting for stock splits. There are other plausible reasons for stock splits in the Financial Literature, which are discussed in the following pages:

Companies with stock price ranging higher in the market try to attract the investors by reducing the price of the stock and bring them to the popular trading range (McNichols et al., 1990), which in other words referred as trading range hypothesis. Stocks with very high price would not be considered by the common investors, as they would get lesser number of shares for the given amount. New investors entering into the market always prefer those stocks which are in the trading range or with lesser share price (Satyajit Dhar et al., 2006). Stock split is one of the techniques in which the corporate brings the stock price to the trading range. Companies with stock price ranging higher in the market try to attract the investors by reducing the price of the stock and bring them to the popular trading range.

Stock split may be used by the companies to signal private information about the future earnings of the companies (Grinblatt et al., 1984), termed as signaling hypothesis. Companies that split their shares have a higher short term earnings growth in the future than firms that do not. The market share of high growth firms increases very fast. If the shares are not split periodically, they fall outside the popular trading range. Therefore these companies resort to stock splits from time to time (Lakonishok et al., 1987).The stock split thus is the informational value that the company is expected to perform efficiently and profitably and that the shares have been split to avoid future high price per share.

Stocks with very high price would not be considered by the common investors, as they would get few numbers of shares for the given amount. New investors entering into the market always prefer those stocks which are in the trading range or with lesser share price. Stock split is one of the techniques in which the corporate bring the stock price to the trading range. A stock split lowers the share price, which in turn makes stocks more attractive to retail investors and culminates in driving the share price higher and in turn improve the market capitalization of the companies. Most of the CFOs' have opined that an exercise of splitting stocks could remove the psychological problem or block of paying a higher price for stocks (Baker et al., 1994). Shares are split to improve liquidity or increase trading in a company's share (Muscarella et al., 1996).

Arbel et al., (1993), predominantly in the context of stock splits have proposed the Neglected Firm Hypothesis. According to them, if there is little information about a firm, its shares trade at a discount. Thus, a firm's manager use the split to draw attention of the investors to ensure that information about the company is recognized widely than before. The companies opt for stock splits, if it is felt that the shares are undervalued and also neglected by the investing community in the stock market. The idea is, when a split is effected, the analysts will re examine the company and if the management is right, the analysts will find its prospects more favourable and in turn improve the ratings of the stock. The stock splits strategy across the globe other than in India is to send an optimistic signal about the future prospects of companies, which was researched and found to be correct. In India, empirical studies have shown that corporates split stocks to gain the attention of retail investors (i.e., penchant for attention) (Gupta Amitabh et al., 2007).

SEBI Guidelines on Stock Split

The equity shares of the listed companies were originally required to be offered to the public in the denominations with face value of Rs. 10 or Rs. 100. Before SEBI took over the control of the capital market in 1992 as the securities regulator, it was Controller of the Capital Issue (CCI) that controlled the issue of shares by listed companies. The CCI, under the Ministry of Finance had stipulated that equity shares which are in denominations other than those of Rs. 10 or Rs. 100 need to be converted into those of Rs. 10 or Rs. 100.

SEBI has provided the following guidelines:

a. The companies are given the freedom to issue the shares in any denomination to be determined by them in accordance with section 13(4) of the Companies Act, 1956. However, these shares would not be issued in decimal of rupee.

b. The companies that seek to change the standard may do so after amending the Memorandum and,

c. The existing companies which have issued shares of face value Rs 10 and Rs 100 may also change the standard denomination other than decimal of the rupee by splitting or consolidating the existing shares after amending their Memorandum and Articles of Association.

d. Only those companies whose shares are dematerialized shall be eligible to alter the standard denomination.

e. At any given time there shall be only one denomination for the shares of the company.

The company shall adhere to the disclosure and the accounting norms specified by SEBI from time to time.

SEBI, after several instances, issued advisories to curb abuse of stock splits. A committee named Secondary Market Advisory Committee (SMAC) was set by SEBI in the year 2003 and the following are the modifications and suggestions to the earlier directive in 1999:

* No listed company whose market price in the previous six months is less than Rs.500 per share can split the value of its equity share.

* If the company goes in for split or consolidation, it will not be permitted to do so again for a period of three years from the date of the last split / consolidation.

* The change in the par value will have to be disseminated through the websites of the stock exchanges for a continuous period of one year from the date of last split / consolidation.

* This should be in addition to the condition stated in SEBI circular dated June14, 1999 which is discussed earlier.

In the year 2005, the Primary Market Advisory Committee (PMAC) of SEBI rejected the guidelines laid down by the SMAC in the year 2003. The PMAC was of the opinion that all companies should have a uniform face value of Re.1 which would make the investors in comparing the performance of stocks with ease. However in May 2010, a special advisory committee of SEBI rejected the idea of having a uniform face value of Rs. 1 for all the companies. The committee opined that all the dividend announcements of companies were currently on per share basis as against the announcements on percentage basis. Also the companies were already resorting to stock splits and would soon reach the Rs.1 level mark. Hence, there are no clear guidelines for allowing companies to split stocks in India.

Literature Review

The question on why companies split stocks despite the fact that it is a cosmetic event has been researched and analysed from two broad perspectives. First perspective is from the point of view of the market. Market's reaction to stock split announcements in terms of change in price, volume of trade, returns etc have been researched. Secondly, the managers' opinion on companies splitting stocks have been researched in the form of surveys and interpreted. The following literature review will highlight the earlier studies from both the perspectives.

Dolly (1933) surveyed managers of eighty-eight companies issuing stock splits; the finding of the survey was that the main motive for issuing stock splits is to widen the distribution base among the shareholders. This leads to increased marketability of the share and enhanced advertising value of the company. Corporate managers believe that a wider distribution of shares leads to a steadier volume of trading. The other reasons for issuing stock splits are to receive higher effective dividend rates, to facilitate the sale of stocks, to permit listing of the stocks and to create goodwill in the stock market.

Baker et al., (1980) surveyed 100 chief finance officers on their perceptions about stock splits. The conclusion drawn from the 63 responses received was that stock splits serve to keep the stock price in an optimal range, thereby, increasing liquidity and the number of shareholders.

Baker et al., (1993) surveyed 251 New York Stock Exchange and American Stock Exchange firms that issued stock splits. The responses of 136 firms reveal that the primary motive for issuing a stock split is to move the share price to a better trading range, resulting in improved trading volumes. Some other important motives include signaling better future prospects to attract potential investors. The respondents also expressed the view that the preferred trading range for their stocks is $20 to $35.

Rozeff et al., (2001),the authors' have tested hypotheses like institutional ownership effects upon firm split behavior, signaling hypothesis and association between split behavior and pre existing institutional ownership levels etc. The findings of the study show that institutional investors prefer stocks that approve stock splits and have the ability to identify firms which spit stocks.

Rao et al., (2002) investigated the effects of stock splits on market valuation and trading pattern around split announcement and ex -date of BSE30 (Bombay Stock Exchange) stocks of India. It is found that there is abnormal return of 7.14 per cent around the stock splits announcements. The study also finds that there is no liquidity after stock splits. The abnormal returns are statistically significant around the ex -split date.

Budhraja et al., (2003) undertook a study of BSE30 (Bombay Stock Exchange) stocks of India and argued that the announcement of a split sets off the following chain of events like increase in the daily number of transactions which in turn increases the noiseness of the security return process. The increase in noise raises the tax option value of the stock and it is this value that generates the announcement effect of stock splits.

The author conducted a study in the Spanish Market in the year 1998-1999. The evidence suggests that there is negative effect on price and return of stock splits and the presence of a positive effect on volatility and trading volume. The paper concludes that signaling hypothesis and irrelevance hypothesis does not hold good during the period of study (Juan, 2003).

According to Hanaeda et al., (2004), the following are the market reaction to stock splits in Japan. First, they show that firms that undergo stock splits experience positive abnormal announcement returns. Secondly, average daily value of shares traded and average daily volume turnover decrease after stock splits, suggesting that stock splits negatively affect liquidity. Third, stock splits alter the ownership structure of firms by increasing the number of individual shareholders.

Dhar et al., (2005) examined the trades of individual and professional investors around stock splits and have found that splits bring about a significant shift in investor clientele. They conclude that stock splits help attract new investors and improve stock liquidity. The shift in clientele also influences price discovery and asset prices: stocks exhibit stronger serial correlation after splits; and the introduction of new investors explains part of the positive post split drift puzzle.

Hijroh (2007) examined the impact of stock splits on price, returns and volume of trade in Jakarta Stock Exchange. A sample of companies which split stocks for the period January 2004 to October 2006 (19 companies) were identified. The results indicate that the difference between stock price and trading volume before and after the stock split event is significant at 1 percent and trading volumes are used where significant levels of 0.05 or 5 percent.

Gupta (2007) provided evidence that there is no announcement effect associated with stock splits in India though there does exist a pronounced ex- day effect. No evidence for trading range hypothesis as a possible explanation for stock splits in India, as majority of shares that underwent split was trading at low market prices. Neglected Firm Hypothesis holds good for the Indian Market.

Harish (2007), in his study took a close look at stock split as an event to study the efficiency of the Indian market. The results have shown that the abnormal returns during pre and post stock splits are statistically not significant leading to the conclusion that semi strong form of efficiency do not exist in the Indian stock market.

Dhar et al., (2008) examined the effects of stock splits and bonus issue on the Indian stock market. The study also examined the nature of efficiency of Indian stock market. The results have shown that both the events are associated with significantly positive announcement effect. For the stock splits, the abnormal returns are 0.8 per cent and the paper has found semi-strong form efficiency in the Indian stock market.

Joshipura Mayank (2008), the results have shown that there is significant positive abnormal return associated with stock split, but it reverses in just a few days after the event day and generates significant negative abnormal returns in a slightly longer post event days. In conclusion, a stock split does not have a positive impact on the wealth of the shareholders and only improves liquidity of the stocks.

Satyajit et al., (2008) have attempted to know the impact of stock splits and bonus announcements on Indian stock market. The study has shown that the two events are significantly associated with positive announcement effect. Finally they have found semi strong form efficiency in Indian stock market.

Singh Ajay et al., (2008), in their study have found that stock splits can make buying shares more affordable to small investors and split induced higher trading costs can help attract more brokers to promote the stock and new limit order traders to supply liquidity. The study has also found that managers of companies facing order execution difficulty and lock in risks have incentives to use stock splits to improve trading speed at the expense of higher trading costs.

The study analysed the impact of stock splits on returns and for this purpose, the returns in the period prior to the announcement are compared with the returns after the execution of the split, in terms of mean returns and variance of returns. The results of the study indicate strong evidence for an increase in the liquidity of the stock after the split (Dash et al., 2009).

George (2009) undertook a study of companies which have split stocks in India during the period 2004-2005. The study was aimed at comparing the dividend payment before and after the stock split. The study finds that there is increase in the dividend payout in the post split period when compared to the pre split period.The financial performance also improved considerably in the post split period supporting signaling hypothesis.

This paper investigates the value consequences of stock splits in a market where institutional characteristics minimize the effects of price realignment and signalling of Greek firms. Further, split factors are directly related to pre-split price levels and deviations from average market prices. Splitting firms also realize earnings improvement which is not reversed after the stock split. They interpret this as evidence in support, respectively, of the self-selection and "attention-gathering" hypotheses. There is no evidence of liquidity improvement as suggested in the earlier studies (Leledakis et al., 2009).

Raja et al., (2009) studied the stock split announcements made by Information technology companies in India. The results of the study have showed that security prices reacted to stock split announcements. The reaction took place for a few days surrounding the split date and continued up to fifteen days from the split date. They have concluded that the Indian stock market in respect of IT companies is efficient This can be used by the investors for obtaining abnormal returns during or around the announcement period.

The authors in their study have analysed the impact of stock split on price, returns and volume of trade in the Indian stock market. The study finds that average price of shares dropped from Rs. 294.42 to 289.32 during the post stock split period. The trading volume significantly improved from 29608 to 133260 shares. To determine whether stock splits have created wealth for the shareholders, cumulative average abnormal returns were calculated for a period of thirty days, i.e., fifteen days prior to stock split and fifteen days after the stock split. The returns in the post split period were 0.0140 when compared to the returns of (1.25) in the pre split period and hence the abnormal returns improved post split. (Sriram et al., 2009).

The authors have examined the effect of stock splits of nine companies which had undergone stock split in Nairobi Stock Exchange in the period 2002 to 2008. The Kenyan market reacted positively to stock splits as there was increase in volume of trade around the stock split date and so was the increase in trading volume after the stock split. The authors conclude that stock split as an event signals good performance of the companies in the future using average abnormal returns (Jaduda et al., 2010).

Mehta (2010) investigated the Indian managers' opinion about stock splits and their motives for issuing them. The empirical findings of the survey reveal that management views stock splits as a tool that enhances trading liquidity. It brings the share price down to a preferred trading range, making the stock more attractive to investors. This results in increased share liquidity. The issuance of stock splits prior to a public offer also improves the marketability of the shares. However, the respondents do not believe that stock splits provide any positive signals about the future prospects of a firm.

The authors have examined the factors, which influence stock split decisions in Indian context. The study has taken a sample of 50 companies listed in BSE (Bombay Stock Exchange) during the period 2007. Results have shown that there is positively significant change in the profit after tax, volume of trade and FII holdings between pre and post split date. The results have shown that Price of shares (5 days prior to stock split) and volume of trade are the factors influencing stock split decisions in Indian stock market, thereby indicating that companies with highly priced shares split stocks to increase volume of trade; thereby rejecting the hypothesis that stock splits signals improved future earnings of the companies. Liquidity hypothesis and trading range hypothesis are holding good for the Indian stock market (Sriram et al., 2010).

The paper investigates the trading volume reaction to the events such as stock dividends and stock splits for a set of Tunisian firms. The authors find an abnormal trading volume around the announcement day of stock dividends. This result can be explained by the size of firms and by the neglected firm hypothesis. However, the authors do not find any reaction of volume around the announcement or the execution dates of stock splits (Daadaa et al., 2011).

Li et al.,(2011) analysed the market reaction to stock splits in U.S for the period 2000-2009. A significant positive Cumulative Average Abnormal Return (CAAR) was observed around the announcement date. Liquidity increases lead to higher stock price changes, which supports the liquidity improvement hypothesis. Further, firm size and abnormal returns are inversely related, which is in line with the attention hypothesis.

According to Ray Kanti Koustubh (2011), the Indian market reacts to the stock split announcements but not to bonus issues, and the change in liquidity is significant for stock splits @ 1 percent significant level, whereas with 5 percent level of significance both bonus issues and stock splits show significant change in liquidity from pre to post event period.

Gap in Existing Literature

The earlier studies have concluded that splits are undertaken to improve liquidity, bring the share price to a desired trading range or both. The findings are consistent with the respect to the studies based on the market reactions and also based on the survey conducted among the managers' of various listed companies. There are little studies which have studied the opinion of investors on stock splits and the reasons behind companies splitting stocks. Hence the present study.

Objectives

The objectives of the present study are to analyse the demographic profile of the investors' and to elicit their opinion on the motives of the companies splitting stocks in India.

Methodology

Research Design--Descriptive research is used to obtain information concerning the current status of the phenomena and to describe "what exists" with respect to variables or conditions in a situation. The present study aims to describe the investors' opinion on the motives behind the companies splitting stocks in India. Hence, descriptive design is considered more appropriate for the study.

Population and Sample--The source data was collected from a private stock broking firm in Coimbatore. A total of 214 investors got registered in the firm and they were considered as the population. By employing systematic random sampling procedure 110 investors were selected as the sample for the study. A total of 102 samples were arrived as some data had inadequate information.

Data Collection--Primary data is collected from the investors. After a thorough review of the literature related to stock split, the researcher developed a structured questionnaire to elucidate adequate information from the investors. The questionnaire contains questions relating to the demographic factors and statements related to investors motives behind stock splits by companies, which the investors have to indicate their response on a five point likert scale of 1 to 5 where 1 means strongly disagree' 2 means disagree' 3 means can't say' 4 agree' 5 strongly disagree.

Reliability of Data--Cronbach's alpha is used to check the reliability of data in the present study. The alpha so calculated measures the average correlation among the observed variables and it indicates that these variables can combine together to produce the broad factors.

Data Analysis--An exploratory factor analysis is carried out for the data set. This is a technique of data reduction whereby main factors are extracted that explains the correlation among the observed variables. Principal Component Analysis (PCA) is used as the factor extraction method for identifying distinct clusters of observed variables.

Analysis and Interpretation

The analysis shows 53.9percent of the respondents were men and 46.1percent were women. Majority of the respondents (57.8 percent) were graduates, (24.8 percent) were post graduates, (10.8 percent) were HSC background. Around 56percent of the respondents had less than 5 years of experience in the stock market. 28 percent of the respondents had experience of 6-10 years and 9percent of the respondents had experience of 11-15 and 7 percent of the respondents had experience of 15 years and above in investing in stock market. 82 percent of the respondents were long term investors while 18percent of them were day traders. 31.4 percent of the respondents were in the age group of 26-30, 16.6percent were in the category of 21-25 years, 14.7 percent were in the category of 31-35 years, 19.6percent were in the category of 36-40 years and 17.7percent of the respondents were 40 years and above. Among the respondents, 21.6 percent were doing business and majority of the respondents (73.5 percent) were employed in service. In terms of annual income, majority of the respondents (42.2 percent) earned between Rs 500001-700000, while 38.2 percent of the respondents earned income between Rs. 300000-500000 p.a. 19.6 percent of the respondents earned income of more than Rs.700000 p.a.

The present study has an alpha of 0.749. Banga et al., (2012) report that the cut off range of Cronbach's alpha is 0.7-0.8. This indicates that these variables can combine together to produce the broad factors. Table II shows the Rotated Component Matrix. It indicates the relationship between broad factors having non-zero and significant factor loadings with a few variables. In the present study, each row in the rotated component matrix presents the factor for each variables spread across four broad factors such as Liquidity, Signaling, Trading Range and Neglected Firm.

The first factor has the highest loading for liquidity (0.442). Similarly the statement no.3 (0.679), no.40.499), no.5 (0.707), no.7 (0.495), no.9(0.630), no.14(0.455) and no.15(0.472) have the highest values and fall under the category Liquidity. This shows that stock splits are undertaken by companies in order to improve the trading volume of shares.

Statement no.2 (0.618), no.7 (0.689) and no.8 (0.630) have the highest loadings for signaling thus concluding that splits are undertaken by companies which have done well in the past and indicate good performance in the future. Thus, there is a favourable market reaction to stock splits.

Statement no.10 (0.472) and no.11 (0.643) have the highest loading for Trading Range. This indicates that splits are undertaken by the companies whose prices have soared high prior to the splits. Post split, share prices are adjusted for the split ratio which in turn increases the volume of trade and volatility in share price.

Statement no.12 (0.581) and no.13 (0.643) have the highest loading for Neglected Firm. This shows that splits are only a cosmetic event and its purpose is to improve valuation of shares by companies.

To test whether there is any significant difference in the opinion of investors regarding stock split by companies, ANOVA (Analysis of Variance) was carried out. The following table shows the ANOVA results.

Table III shows the most preferred opinion relating to the motives behind stock splits by companies in India. The table shows that neglected firm and trading range are the major reasons for companies to split stocks in India. The average values for neglected firm and trading range are 4.012 and 3.3 respectively when compared to Signaling (2.885) and Trading range (2.93). The ANOVA table shows that there is significant difference in the opinion of the investors regarding stock split by companies. The F value is significant @1 percent (p<.01).Post hoc test was performed to identify the difference and it was found that the mean value of neglected firm had significant difference with other broad factors viz., liquidity, signaling and trading range. The mean difference between neglected firm and liquidity was 1.06915. The mean difference between neglected firm and signalling was 1.11438. Similarly, the mean difference between neglected firm and trading range was 0.69118. All the differences were statistically significant @ 5 percent. Therefore, it was inferred that splits the first major motive of stock split is neglected firm, the second factor being trading range, third liquidity and finally signalling. Companies undertake splits in order to improve valuation of shares and to bring down the share price to a desired trading range.

Findings and Conclusion

A phenomenal work exists relating to stock splits in India and abroad. A few papers have discussed about the opinion of Managers' on stock split decisions. There are no studies which have elicited the investing fraternity's response to stock splits. The current study is an attempt to fill the research gap. The study's analysis has broadly classified all the statements into four broad factors, namely, Liquidity, Signaling, Trading Range and Neglected Firm. It is found from the study of the four broad factors, neglected firm and trading range are the major factors which encourage companies to split stocks in India. The study's findings are not consistent with the findings of the studies on Managers' Opinion on stock splits. Their findings are liquidity and trading range hypotheses. Thus it can be concluded that stock splits are only a cosmetic event and are primarily undertaken to reduce the share price and encourage small investors' to invest in shares. Also, stock splits are undertaken by the companies to improve valuation of shares. The present study also shows that the investors' are aware of the reasons as to why companies split in India. To conclude, the investors' should be cautious when companies announce stock splits. They should go through the fundamentals of the company and the industry before taking any decisions on investing. Since, there are no regulations on stock splits in India, investors' are advised to take rationale decisions.

References

Arbel, Avner., & Swanson, Gene (1993). The role of Information in stock split announcements. Quarterly Journal of Business and Economics, 14-21.

Baker, H. Kent., & Patricia, Gallagher, L. (1980, Summer). Management's view of stock split. Financial Management, 73-77.

Baker, Kent., & Powell, Gary (1993). Further evidence on managerial motives for stock splits. Quarterly Journal of Business and Economics, 32, 20-31.

Banga, Charu., & Gupta, Amitabh (2012). Motives for mergers and takevovers in the Indian mutual fund industry. Vikalpa, 2, 33-41.

Budhraja, I., Parekh, P., & Singh, T. (2003). Empirical study on market Reaction around the bonus and the stock split, Mudra SIGFI. IIML Journal of Finance, 2, 21-35.

Dhar, Satyajit., & Chhaochharia, Sweta (2008). Market reaction around the stock splits and bonus Issues: Indian evidence, IIM, Lucknow, Working Paper Series. Pp.1-24.

Dolley, James, C. (1933). Common stock split-Ups--Motives and effects. Harvard Business Review 12(1), 70-81.

Fama, Eugene F., Lawrence, Fisher., Michael C. Jenson., & Richard Roll (1969). The adjustment of stock prices to new information. International Economic Review, 10 (1), 1-21.

Grinblatt, Mark S., Ronald W. Masulis., & Sheridan, Titman (1984). The valuation effects of stock splits and stock dividends. Journal of Financial Economics, 13 (4), 461-490.

Gupta, Amitabh., & Gupta (2007). Market reaction to stock market splits- Evidence from India. ICFAI Journal of Applied Finance, 13, 1-18.

Mehta, Chavi., Surendra, S, Yadav., & Jain, P,K. (2010). Managerial motives of stock splits in India. Journal of Applied Finance, 1, 103-117.

Mcnichols, Maureen., & Dravid, Ajay (1990). Stock dividends, stock splits and signalling, The Journal of Finance, 45 (3), 857-877.

Raja, M., & Sudhakar, Clement (2010). An empirical test of indian stock market efficiency in respect to bonus issue announcement. Asia Pacific Journal of Finance and Banking Research, 4 (4), 1-12.

Rao, S, N., & Lukose, Jijo (2002). Market reactions to stock splits-An empirical study of India. ICFAI Journal of Applied Finance, 8 (2), 26-40.

Ray, Kanti, Koustubh (2011). Market reaction to bonus issues and stock splits in India-An empirical study. The IUP Journal of Applied Finance, 17, (1), 54-67.

Sriram, M., & Senthil, M. (2009). Effect of stock splits on Price, returns and volume of trade-evidence from India. International Journal of Business Management, Economics and Information Technology, 1, 363-37.

Sriram, M., & Senthil, M. (2010). A Study on factors influencing stock split decisions-evidence from India. NSHM Journal of Management Research and Applications, 2, 1-10.

M. Sriram

Associate Professor, D.J. Academy for Managerial Excellence, Coimbatore.

P.T. Saleendran

Associate Professor, D.J. Academy for Managerial Excellence, Coimbatore.

Table--I

Descriptives

Gender                  Total    Percentage

Male                      55        53.9
Female                    47        46.1
Total                    102         100

Educational Qualification

HSC                       11        10.8
Graduate                  59        57.8
Post Graduate             25        24.4
Others                    7           7
Total                    102         100

Years of Experience in Stock Market

< 5 years                 57         56
6-10 years                29         28
11-15 years               9           9
>15 years                 7           7
Total                    102         100

Do You Trade in Stocks on Daily Basis?

Yes                       18         18
No                        84         82
Total                    102         100

Age of the Respondents  Total    Percentage

21-25                     17        16.6
26-30                     32        31.4
31-35                     15        14.7
36-40                     18        19.6
>40 years                 20        17.7
Total                    102         100

Occupation of the Respondents

Business                  22        21.6
Employed                  75        73.5
Others                    5          4.9
Total                    102         100

Annual Income of the Respondents

Rs300000-500000 pa        39        38.2
500001-700000 pa          43        42.2
>700000 pa                20        19.6
Total                    102         100

Table--II

Table Showing Rotated component Matrix

      Statements                                 Liquidity   Signaling

1.    A stock split is undertaken to encourage     0.442      -0.193
      small investors in invest in shares.

2.    A stock split increases the number of       -0.396       0.618
      shareholders in a company

3.    A stock split makes the shares more          0.679      -0.220
      attractive to individual investors by
      lowering the share prices.

4.    A stock split makes the shares more          0.499       0.185
      attractive to institutional investors by
      lowering the share price.

5.    A stock split sends positive signal          0.707       0.330
      about a company's future performance.

6.    A stock split makes it easier to sell        0.561       0.564
      new equity shares by increasing the
      number of shareholders

7.    A stock split has a favourable market        0.495      -0.126
      reaction

8.    A stock split increases the total cash       0.220       0.689
      dividend for the shareholders.

9.    A stock split attracts the attention of      0.630      -0.319
      investing fraternity

10.   A stock split brings the share price to      0.362       0.067
      a popular trading range

11.   Stock splits are undertaken by companies     0.379      -0.029
      whose share prices has soared high prior
      to split.

12.   A stock split is only a cosmetic event.      0.120      -0.323

13.   Stock splits are undertaken to improve       0.522      -0.104
      valuation of shares.

14.   Trading volume increases when companies      0.455      -0.334
      split stocks

15.   Share prices do not adjust to the split      0.472       0.385
      ratio in the post split period.

                                                 Trading   Neglected
      Statements                                  Range      Firm

1.    A stock split is undertaken to encourage    0.215     -0.294
      small investors in invest in shares.

2.    A stock split increases the number of      -0.116      0.143
      shareholders in a company

3.    A stock split makes the shares more        -0.199     -0.103
      attractive to individual investors by
      lowering the share prices.

4.    A stock split makes the shares more        -0.246     -0.096
      attractive to institutional investors by
      lowering the share price.

5.    A stock split sends positive signal        -0.273      0.154
      about a company's future performance.

6.    A stock split makes it easier to sell      -0.073     -0.042
      new equity shares by increasing the
      number of shareholders

7.    A stock split has a favourable market       0.098     -0.051
      reaction

8.    A stock split increases the total cash      0.177      0.245
      dividend for the shareholders.

9.    A stock split attracts the attention of    -0.144      0.010
      investing fraternity

10.   A stock split brings the share price to     0.472     -0.292
      a popular trading range

11.   Stock splits are undertaken by companies    0.64       0.166
      whose share prices has soared high prior
      to split.

12.   A stock split is only a cosmetic event.     0.497      0.581

13.   Stock splits are undertaken to improve     -0.260      0.634
      valuation of shares.

14.   Trading volume increases when companies    -0.280      -0.10
      split stocks

15.   Share prices do not adjust to the split     0.304     -0.272
      ratio in the post split period.

Table III

Table Showing Investors' Opinion (Average) on Stock Splits

                                         Std.         Std.
Factors             N        Mean      Deviation     Error

Liquidity          102       2.93        0.531       0.0526
Signaling          102      2.8885       0.791       .0783
Trading Range      102       3.30        0.814       .0806
Neglected Firm     102       4.012       0.843        .047

ANOVA

                 Sum of    Degree of     Mean
                 Squares    Freedom      Square        F         Sig

Between Groups    81.31        3         27.43       52.55     0.000 **
Within Groups    208.261      404        0.515
Total            289.571      407

** significant @ 1%
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Author:Sriram, M.; Saleendran, P.T.
Publication:Abhigyan
Geographic Code:9INDI
Date:Jul 1, 2013
Words:6053
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