Analysis of Stock Split Event Toward the Abnormal Return and Liquidity Share Changes (Study Case in Companies Listed in Indonesia Stock Exchange From 2010 to 2012)

Abstract

Stock split is always appear to be an interesting event to discuss. Due to their inception, stock split has been somewhat of an anomaly in the world of finance. While stock split do not affect a firm’s fundamental such as cash flow, the market tends to react them positively. The objective of this research is to examine the influence of stock split event toward abnormal return and liquidity share changes which represented by trading volume activity (TVA). The samples are 18 companies who did stock split and listed in Indonesia Stock Exchange (IDX) in 2010-2012. Then, data analysis is performed by Computer Statistic Program SPSS for Window Release 16.0. To measure the relation between the security and return, this research was using event study (observation period) for 21 days (10 days before and 10 days after stock split announcement). The results show that stock split event has no positive influence toward abnormal return and there is no significant difference of abnormal return before and after stock split announcement. Furthermore, this research also found out that stock split event has positive influence toward trading volume activity and there is also significant different of trading volume activity before and after stock split announcement. This finding also indicates that trading theory which is suggest that stock split realign share price to a preferred price range is the main motive for the company to do stock split announcement.