THE IMPACT OF STOCK SPLIT ON STOCK PRICE AND RETURN: COMPANIES LISTED ON BSE

Abstract

The primary objective of the research is to evaluate the effect of stock splits on the price of stocks & returns of firms listed on the Bombay Stock Exchange (BSE). The analysis focuses on companies that executed stock splits within the timeframe from April 1, 2019, to March 31, 2022. The study employs a purposive sampling method to gather relevant data. Out of 166 companies that undertook stock splits during the specified period in the Indian stock market (NSE and BSE), 58 companies that conducted forward stock splits on BSE were selected for the research. This research employs the Wilcoxon signed-rank test to assess the impact of stock splits on stock price & return by comparing stock liquidity data from a 28-day period, encompassing two weeks prior to, and following the split. The test results for both price and return indicate a p-value below 0.05 (denoted as "<.001"), so alternative hypothesis is adopted, signifying a substantial effect of stock splits on stock prices and returns. Thus, the alternative hypothesis is adopted, signifying a substantial impact of stock splits on stock prices and substantial impact of stock splits on returns. It has been concluded that the prices of stock tend to decrease post-split whereas the returns of stocks tend to increase after the event of stock split.