REIT Stock Splits and Liquidity Changes

Gow-Cheng Huang, Kartono Liano and Ming-Shiun Pan

Online First™, 3 December 2009


This study examines the motive of stock splits made by REITs. We find that REIT liquidity increases after the split announcement. However, the increase in liquidity is limited to days around the split announcement. After the ex-date, the liquidity tends to revert back to the pre-split level. We find that the positive market reaction around the announcement date is positively related to the change in short-term liquidity but not to the change in long-term liquidity. The announcement effect is also not correlated with future changes in operating performance. Overall, our results suggest that REITs split their share to attract investors’ attention rather than to signal or to improve trading liquidity in the long run.Keywords  REIT stock split – Liquidity – Attention-grabbing – Signaling

JEL classification  G32

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