EFFECTS OF SPLIT ANNOUNCEMENTS ON STOCK

PRICES OF PUBLIC QUOTED FIRMS IN KENYA

BY

KEFA MICHAEL GITAU NGOIRI

UNITED STATES INTERNATIONAL UNIVERSITY-AFRICA

SUMMER 2017 EFFECTS OF STOCK SPLIT ANNOUNCEMENTS ON STOCK

PRICES OF PUBLIC QUOTED FIRMS IN KENYA

BY

KEFA NGOIRI

A Research Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Masters in Business Administration (MBA)

UNITED STATES INTERNATIONAL UNIVERSITY-AFRICA

SUMMER 2017 DECLARATION

I, the undersigned declare that this is my original work and has not been presented to any other institution other than The United States International University for academic credit

Signature; ……………………………… Date; ………………………………..

Kefa M.G. Ngoiri (646964)

This project has been presented for examination with my approval as the appointed supervisor

Signature; ……………………………… Date; ………………………………..

Dr.Francis Gatumo

Signature; ……………………………… Date; ………………………………..

Dean Chandaria School of Business

ii

ACKNOWLEDGEMENT

I first wish to thank the almighty God for his grace and gift of life and giving me patience as I undertook the project as things got rough. Special thanks to my family for moral support and more so to my mother Margaret Ngoiri for being there though out my life and providing whatever I needed since my childhood, I salute you. I also wish to appreciate through this project my grandmother Joyce Ngoiri, though not directly involved in the project she was instrumental through her way of life which always keeps me going and picking myself up when things get rough.

I also wish to acknowledge my Supervisor Dr.Francis Mambo Gatumo for having agreed to supervise this project and for his guidance through the project.

For anyone who contributed towards this project please accept my kind appreciation.

iii

ABSTRACT The general objective of this study was to examine effects of stock split announcements on stock prices of public quoted firms in Kenya. The purpose of this study was to establish the effects of stock split announcement on stock prices of public quoted firms in Kenya. The study was guided by the following research questions; does stock split announcement result in change of of public quoted firms in Kenya? and What is the effect of stock split announcement on the stock volumes of public quoted firms in Kenya?

Descriptive research design was used seeking to explain the relationship between stock split announcement and stock prices as well as stock volumes. Event study methodology was employed to determine the effects of the split announcement. Stock price changes were analysed to with an aim to determine if stock splits announcement bring about any adjustment or changes in the Kenyan market. Daily stock price and volumes traded were were recorded during the study period of 90 days comprising of 45 days before the split and 45 days after the split.

The study established that announcement of stock split positively impacts on the share prices but seldomly affects volumes traded. The study recommends that CMA should consider having a policy to encourage firms to split their shares to increase their liquidity and encourage retail to be active in the market. More researches should be encouraged in this area and NSE should avail historical information freely which may also encourage transparency and confidence in the market.

iv

TABLE OF CONTENT

DECLARATION...... ii ACKNOWLEDGEMENT ...... iii ABSTRACT ...... iv LIST OF TABLES ...... vii LIST OF FIGURES ...... viii

CHAPTER ONE ...... 1 1.0 INTRODUCTION...... 1 1.1 Background of the Study ...... 1 1.2 Problem Statement ...... 4 1.3 Research Objectives ...... 6 1.4 Research Questions ...... 6 1.5 Significance of the Study ...... 6 1.6 Scope of the Study ...... 7 1.7 Limitations of the Study...... 7 1.8 Definition of Terms...... 7 1.9 Chapter Summary ...... 8

CHAPTER TWO ...... 9 2.0 LITERATURE REVIEW ...... 9 2.1 Introduction ...... 9 2.2 Effect of Stock Split Announcement on Stock Prices ...... 9 2.3 Effect of Stock Split Announcement on Stock Volumes ...... 15 2.4 Conceptual Framework ...... 20 2.5 Chapter Summary ...... 21 CHAPTER THREE ...... 22 3.0 RESEARCH METHODOLOGY ...... 22 3.1 Introduction ...... 22 3.2 Research Design...... 22 3.3 Population and Sampling Design ...... 22 3.4 Data Collection Methods ...... 23 3.5 Data Analysis Methods ...... 24

v

3.6 Chapter Summary ...... 24

CHAPTER FOUR ...... 25 4.0 RESULTS AND FINDINGS ...... 25 4.1 Introduction ...... 25 4.2 Descriptive Statistics ...... 25 4.3 Normative Test...... 25 4.4 Change of Share Price ...... 26 4.5 Average Stock Volume ...... 27 4.5 Chapter Summary ...... 29

CHAPTER FIVE ...... 30 5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ...... 30 5.1 Introduction ...... 30 5.2 Summary ...... 30 5.3 Discussion ...... 31 5.4 Conclusion ...... 33 5.5 Recommendations ...... 33

REFERENCES ...... 35 APPENDICES ...... 40 Appendix I: Letter of Introduction ...... 40 Appendix II: Study Sample ...... 41 Appendix III: Data Collection Sheet ...... 41

vi

LIST OF TABLES Table 4.1: Descriptive Table Showing Statistics on the Announcement Day ...... 25

Table 4.2: T-test Paired Two Sample for Change of Share Prices ...... 26

Table 4.3: T-test Paired Two Sample for Average Stock Volume (ASV)...... 28

vii

LIST OF FIGURES Figure 2.1: Conceptual Framework ...... 20

Figure 4.1: Reaction of Share Price to Share Split Announcement ...... 29

viii

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Study

Capital markets are markets for term reserves with maturity period of over one year. This is the place where financial instruments like debentures, term credits, bonds, ordinary shares, et cetera, are traded. money related organizations incorporate the stock trade, employ buy organizations, building social orders and renting firms. The capital market is extremely key as it gives long term reserves which are essential for choices. Capital markets encourage global capital stream and additionally going about as vehicles through which outside ventures discover their way into the market (Lyroudi & Dasilas, 2016). In Kenya, the capital market is an essential arm of the general budgetary market that gives venture openings, dispenses funds to genuine speculation, conveys financial assets of long term nature, shares speculation counsel to speculators, mobilizes capital and hence help achieve real economic output, and also helps in pricing of securities (Lyroudi & Dasilas, 2016).

The impact of stock split announcements on the value of the firm remains a big baffle. As per Miller and Modigliani (2013), the value of a firm is not influenced by the firm’s strategy on profit. The two contended that investors can find a balance on any profit arrangement impact without having to change value of the firm. In any case, chat to their hypothetical presumption, experimental investigations of the effect of stock profits on offer costs have demonstrated that critical value responses happen on the announcement day (Lyroudi and Dasilas, 2016).

Numerous hypothetical systems have attempted to clarify the way of the offer cost and volume response to stock profit announcements, among which the flagging speculation is unmistakable. This speculation suggests that stock profits are utilized by firms to lower the data asymmetry amongst supervisors and investors about future income (Lamoureux and Poon, 2012). Grinblatt et al., 2013). Different clarifications include: The money substitution theory, which recommends that organizations issue stock profits as a substitute for trade profits out request to ration their money holds (Doran and Nachtmann, 2013). The speculation of typical trading range, which suggests that shares ought to be split by chiefs to change the cost into a specific range while trading (Ambarish, et al., 2013); Additionally,

1 the speculation known as consideration getting, proposes that shares ought to be split by directors so as to draw in the consideration of investors and financial examiners (Grinblattetal.,2014).;The efficient market hypothesis (Francis et al., 2012); The liquidity hypothesis which suggests that Managers declare Stock to increase the liquidity of their shares (Galariotis and Giouvris, 2014).

Expounding on the response of the share trading due to stock split announcement in the United States, Francis et al., (2012) explains that, offer costs should completely mirror all accessible data contained in the stock split on the day the announcements made for business sectors to be proficient. This infers the costs of shares are relied upon to rapidly adjust to the data about the split and not demonstrate any float in costs during the period before or after the announcements made, and from which irregular returns are potentially figured out.

Many scholars have carried out studies on the impact of stock split announcement on stock prices in different markets. The results of their studies are similar to those reported by Fama et al. and support the notion that share prices react to stock split announcements (Doran and Nachtmann, 2015; Dravid and McNichols, 2013; Banker et al., 2013; Aydogan and Muradoglu, 2015; Olowe, 2015; Poon and Uddi 2015; Anderson et al., 2011; Elfakhani and Lung, 2013; Balachandran et al., 2014; Farinha and Basilio, 2016; Leung et al., 2016; Dhar and Chhaochharia, 2015; Woolridge, 2013; Grinblatt et al., 2014).

In addition to the same, a huge amount of empirical evidence tends to associate stock split announcements with abnormal performance in share price. A lot of these evidence proposes that positive stock split are linked to positive stock price reaction, while the reverse is observed in terms of negative stock splits. This market phenomenon can be identified as the information content hypothesis or announcement effect. The profit flagging theory is dependent on Miller and Modigliani (2013) which contends that profits may pass on new data to the market if administrators have preferred data over financial specialists with respect to the firms’ future prospects. Consequently, a profit increment (diminish) passes on great (awful) news to the market and results in an upward (descending) value response. The profits data substance was additionally structured to profit flagging sort models by John and Williams (2015) and Bhattacharya (2013, 2015).

The empirical discoveries of Miller and Rock (2015) and other late reviews bolster the Concept that offer costs respond to stock profit announcements notwithstanding when stock

2 profits in themselves don't contain any conspicuous new data. The question that would take after is that: what causes the offer value response to stock profit announcements? The assumption is that the "amaze component" in stock profit announcements contains data that is more essential to share costs than simply the extra assertion of shares. In their view, Ondigo (2015), there is an association between stock profits and huge money profit expands which the market acknowledges and afterward uses to re-assess the flood of offer salary anticipated.

Subsequently, when the announcements of stock profits are made, the shares costs respond in desire of future money profit increments. Also, the stock profit impact on offer costs debilitates if the announcements related with a money profit diminish. This confirmation recommends that offer costs respond to the future money profit ramifications of stock profit announcements. In the 1980s, the Kenya government understood the need to plan and actualize strategy changes to cultivate reasonable financial improvement with a proficient and stable budgetary framework. In 1989, the Capital Markets Authority (CMA) was framed to aid the formation of a favorable situation for development and improvement of the nation's capital market (Ondigo, 2015).

A stock trade is one of the money related foundations of the capital market. Stock trades are created alongside and are a fundamental piece of the free undertaking framework. The requirement for this sort of market came to fruition therefore of two noteworthy qualities of joint stock (open constrained) organization shares: they are irredeemable and, for them to be transferred there is need for signing of a share transfer from, to facilitate the updating of the issuing ’s shareholders register. A is a special market place where already held and bonds are bought and sold (Onyango, 2014).

A stock split is the division of existing shares into multiple smaller shares. This is done by issuing more shares to existing shareholders e.g. if there is a 3 for 1 stock split , this would mean that for every one share held, the shareholder will have three subsequently if the shares remarkable were 1 M then this will be 3 M post-split. It is intended to make the shares of an organization more moderate by low salary financial specialists and in addition to expand their liquidity in the market. Onyango (2014) characterized a stock split as a trade of shares in which no less than five shares were disseminated for each four previously extraordinary.

3

This implied shareholders got extra shares for each offer already held. Dhar and Chaochharia (2014) found that parts happened at any proportion; the most ordinarily utilized ones being 2:1, 3:2, 5:4, 4:3, etc. After a two for one (2:1) split, for example, every shareholder had twice the same number of shares, yet each spoke to a claim on just half as a great split of the enterprise's advantages and income. Stock split have elicited few civil arguments in the scholastic world with a few specialists contending this is only a restorative since it doesn't have any basic or financial effect on an organization.

Several theories have been advanced on the impacts of share splits announcement on the offer cost. Unusual returns have been witnessed around stock split announcements .In normal and ideal circumstances nothing ought to change given the asymmetry of data according to effective market speculation by Eugene Fama and all the more particularly the semi-solid EMH which shows that new data is immediately integrated in the offer cost and in this regard the announcement of the share split. As per Grinblatt et al. (2014), stock splits were by and large accepted to be just corrective since the company's money streams were not affected. In a hypothetical manner, share splits were thought to be corrective corporate occasions as they simply indicated the separation of one offer into a s number of shares and a lowering the cost of a share in the trade without changing shareholders' riches and relative shareholdings. However, albeit early experimental reviews finding no strange execution after Share splits, Fama et al. (2011) came up with a finding on a positively significant market reaction to share split announcements. Stock splits then did not appear to be as cosmetic as they should be.

1.2 Problem Statement

Most reviews done on stock split in different markets show that more often than not, markets respond decidedly to stock split news. A study carried out in India on how the market reacts to share split and bonus issues came up with a positive average abnormal returns. In the study, it was noted that share split announcement had positive returns in the period of the entire window though the effect was not as sharp on the announcement date (McNichols and Dravid, 2013). In Ghana, the market less significantly reacted to stock split announcement. Another study carried out in 2012 in USA on market reaction to stock split by Alon and Mathias (2012) in their master thesis found out that while in reality it is possible that managers split their shares for investors who prefer low priced shares (Balachandran, 2014), or also attract other

4 investors to their stocks (Lin, 2009), market reaction to split announcements is likely not driven by response to the motives indicated by the managers but by information related to firms earnings thus reaffirming the information hypothesis.

However, an impeccable economic situation appears not to exist in this present reality and along these lines productivity must be accomplished in specific measures (Kipronoh, 2014). The Nairobi Securities Exchange has in the past encountered certain times of extraordinary instability in costs. This is a pointer to the likelihood of Fundamental wasteful aspects which impacts on the shareholder values (Kipronoh, 2014). Crown Berger's offer cost descended from Ksh.38 to Ksh8 in August 2008, this would later settle at Ksh.28 after the arrival of first half year results. From this illustration along these lines one could presume that stock split announcement event for the most split causes stocks to rise.(NSE, 2016)

According to Omenda, (2011), Kenol-Kobil, East African Cables, East African Breweries, Industrial and Commercial Development Corporation (ICDC) and Barclays Bank of Kenya (BBK) had highly priced shares and opted to split to make them affordable to the public, investors and to benefit the company. The extent to which this serves its goal is yet to be seen. Another firm that opted to split its shares despite the low price of shares was the Sasini Tea and Coffee (now Sasini Ltd). All counters other than Sasini Ltd were trading at over Ksh.200 prior to the announcement of the split. Sasini Ltd was at a high of Ksh. 185 prior to the announcement.

There are contrasting views on effects of stock splits on the prices and volumes traded. Equity Bank’s share prices went up by 3.95% in the year 2008 after having a 5-to-1 split, KCB’s share price also went up by approximately 10% after a 10-to-1 split (April 2007) and East Africa Cables share price shot up by 9.03% cent having done a 10-to-1 share split in August 2006 Omenda, (2011).

On the other hand the opposite is depicted, share prices dipped immediately after the share split event. Barclays Bank’s had a 5.45% drop in share price after its November 2016 split. Nation Media Group’s also experienced a dip of approximately 10% after having a 2-to-1 split in the year 2008 Omenda, (2011).

The contrast informs this study as a conclusive finding is not yet available on stock split announcement effect on share prices and trade volumes. Omenda (2011) carried out a study

5 on effects of stock splits on liquidity of listed in NSE and found that share prices is likely to start low and after sometime appreciate tremendously or a time. He found out that in the case of splits, most managers in Kenya opt for stock splits to maintain an optimal trading range. Yet existing empirical research, finds that the impact of split on liquidity is mixed (Omenda, 2011).

A noteworthy issue exists with stock split announcements; the financial specialists view and studies comes about have been known to change impressively. Most financial specialists trust that costs of stocks will increment in incentive after stock split news since offer costs are lower (Nachtmann, 2015).

The contrasting non conclusive findings of previous researches done informed this study to effectively add to academia and policy on determining what effects stock splits announcement have on stock prices and stock traded volumes.

1.3 Research Objectives

The purpose of this study was to establish the effects of stock split announcement on stock prices of public quoted firms in Kenya.

1.4 Research Questions 1.4.1 Does stock split announcement result in change of share price of public quoted firms in Kenya?

1.4.2 What is the effect of stock split announcement on the stock volumes of public quoted firms in Kenya?

1.5 Significance of the Study

The study shall be of the following significance:

1.5.1 Practice

The results of this study are practically significant in several ways. More importantly, it identifies the impact of stock split announcement on stock price and volume on public quoted firm. It also provides information on the degree to which announcements affect market dynamics.

1.5.2 Academia

6

This study also wishes to make a contribution to academia on how significant stock split announcements are on the value of the firm publicly quoted in Kenya. This will also add value to literature in a rarely studied sub set of the market in Kenya as well as the rarely studied volume reactions to share split announcements. 1.5.3 Policy

The findings of this research project will assist policy makers to have a broader perspective on their understanding of market dynamics surrounding share split announcement and that would greatly help in adoption of more customized and appropriate share split announcement policy prescriptions.

1.6 Scope of the Study

The scope of the review is fundamentally constrained to stock split announcement and a supposition that there is no other event during this time when the stock split news are profited which will influence the stock cost. The period covered is the year 2009 to 2015 and with limitation to stock split announcement made by firms quoted in the NSE without a specific focus on particular sections.

1.7 Limitations of the Study

The limitation of the study was that there are a few firms which have conducted a share split in kenya at the Nairobi Securities Exchange. This was coupled by few researches done on the topic making literature review limited I n terms of material.

1.8 Definition of Terms 1.8.1 Stock split

Break down of large stock units to smaller units so that their outstanding number increases and decreases the (Elfakhani, 2013).

1.8.2 Stock split announcement

Stock split announcement refers to the point in time at which a firm public makes it known to the public the extent of periodic distribution to its shareholders (Gitman, 2015).

1.8.3 Nairobi Securities Exchange (NSE)

7

The Nairobi Securities Exchange is the Kenyan which is the trading platform where stocks and bonds are traded. It encompasses several players who are; the Government, Issuers, Investors as well as the financial services regulators (NSE, 2016). 1.8.4 Efficient Market Hypothesis (EMH)

This is a finance theory contending that the stock/ incorporate news and the same reflected in the share prices such that it is extremely difficult for one to gain abnormal profits by holding certain information (Doran and Nachtmann, 2013).

1.8.5 Stock Liquidity and Volume (SLV)

Liquidity is the ability to trade a certain volume of shares at prices which are close to the price and volume of the previous trade (Galariotis and Giouvris, 2014). Stock volume on the other hand pertains to the quantities of shares traded per unit time.

1.8.6 Share Price

Share price is the price of the shares of companies trading at the stock exchange (Mibe, 2010)

1.8.7 Public Quoted Firm

Publicly quoted firms are companies whose shares are traded on a stock exchange (Collins dictionary, 2010)

1.9 Chapter Summary The chapter discussed background of the study, problem statement, research objective, research questions, significance of the study, scope of the study, and definition of terms. Chapter two presents literature review based on the two research questions. Chapter three presents research methods that was used in the study. Chapter four presents results and findings. Chapter five covers discussions, conclusion and recommendations.

8

CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter reviews the accessible literature identified with effects of stock split announcements on stock prices of public quoted firms in Kenya. It covers hypothetical establishment of the study, asset reliance hypothesis, asset based hypothesis. The review is based on the research questions: Do stock split announcement result in an increase or decrease in share price of public quoted firms in Kenya? What is the effect of stock announcement on the stock volumes of public quoted firms in Kenya?

2.2 Effect of Stock Split Announcement on Stock Prices 2.2.1 Stock Split Announcement and Investors’ Future Earnings

Chen and Gao (2012) sought to examine whether stock dividend announcements produced value for companies traded on the Nigerian stock market and to determine the nature of the information such announcements convey. A standard event study methodology, employing the market model, was adopted to determine the abnormal returns both on and surrounding the stock dividend announcement date. A test was presented in light of the planning of announcements and on the recurrence with which the reporting companies ‘shares were traded.

The experts additionally concentrated the data substance of stock profits by utilizing the chi square strategy to test the level of relationship between money profits, income and stock profits. The discoveries showed that organizations that pick their own particular announcement date outside the Nigerian stock trade announcement window encounter positive strange returns if their stock was all the more much of the time traded and negative irregular returns if their stock is less as often as possible traded Chen et al. (2012). Furthermore, support was found for both the money substitution speculation and the flagging theory as clarifications for the data stock profits pass on to shareholders.

Louhichi (2013) looked to focus both the data substance of bookkeeping figures and the speed at which the new data is joined into stock costs. The sample was made out of 117 overnight announcements distributed by Reuters during the period 2001-2013. For each date, the event was ordered into one of three classifications: awful news; uplifting news or

9 no news. The paper utilized intraday event contemplate philosophy to look at market response just before and soon after the occasion. The intraday examination unveiled a few outcomes.

There is a sizeable measure of empirical proof connecting stock split announcements with anomalous stock value execution. The vast majority of this confirmation demonstrates that ideal stock split (profit increments) are connected with positive stock value response, while ominous stock split (profit declines) are connected with troublesome response to stock costs. This market events perceived as "the data content speculation" or "the profit flagging theory" or "the stock split announcements impact", and it is grounded on Miller and Modigliani's (2016) suggestion that profits may transmit new data to the market, if supervisors have prevalent data than financial specialists in regards to the organizations' future prospects (data substance of profits speculation or profit flagging theory).

Consequently, as affirmed by Ambarish et al., (2013), a profit increment or decline passes on great or awful news to the market and results in an upward or descending value response. Various researchers have explored the data substance of stock split announcements and have verified the finding of Fama et al.(2011) that offer costs respond to the flagging substance understood in stock profit announcements, which they allude to as the flagging speculation (Balachandran et al., 2014; Grinblatt et al., 2013; McNichols and Dravid, 2013).

Elfakhani and Lung (2013) looked at the data substance of stock profit announcements in the United States from 1967 to 1976 and inferred that directors passed on positive private data concerning future income to investors through stock profit announcements. Be that as it may, administrators stopped from stock profit announcements when future income were uncertain, so as not to flag negative data to speculators. Subsequently, the flagging theory is a standout amongst the most captivating portrayals, among others, for the stock trade's reaction in connection to stock profit announcements.

The money substitution speculation recommends that organizations issue stock profits as a transitory substitute for trade profits out request to protect their money holds. Empirical reviews give some deficient support to this speculation. For instance, Ghosh and Woolridge (2014) found that a negative securities trade response to profit cuts and oversights by US firms could be remunerated or diminished by announcement of a stock profit as an assistant.

10

Broker et al. (2013) examined the stock trade response to firms in the USA that ended money profits while keeping up their current level of stock profits. They found a positive (albeit factually inconsequential) abnormal return following such announcements. Separately, while studying the Chinese stock market reactions, Chen et al. (2002) provided some evidence that stock dividends appear to be favored over cash dividends. 2.2.2 Stock Price Adjustment to Announcement of New Stock Split News

The presence of positive abnormal returns around the stock split announcement that is found in many empirical studies: Ikenberry et al. (2014); Mukherji and Walker (2013) and Ikenberry and Ramnath (2012) provides evidence for the signaling hypothesis. Ikenberry et al. (2014) examine the market reaction to split announcements by computing five day market-adjusted returns from two days before to two days after the announcement. Market- adjusted returns are calculated by subtracting the five-day holding period return on the Center for Research in Security Prices (CRSP) value-weighted /American Stock Exchange (NYSE-ASE) portfolio from the five- day holding period return for the splitting firms. They assess significance levels using cross-sectional standard errors. The results support the hypothesis that, in addition to bringing share prices back into a trading range, splits also serve as positive signals to the market about higher future returns. Mukherji and Walker (2013) investigate a broad sample of stock splits by firms without confounding events, controlling for industry and size effects. Their results show that stock splits increase the numbers of both individual and institutional shareholders, and they do not affect the proportion of equity held by institutions. They present that abnormal announcement returns are positively correlated with changes in the total number of shareholders. These findings support the signaling hypothesis. Ikenberry and Ramnath (2012) test the under reaction hypothesis of the market using a self-selected event that a company can choose to engage in - a stock split - to examine the sluggish revision in stock split expectations. Using control firms matched on the basis of , value/growth, and nominal share price, they present a buy-and-hold abnormal return of 9% in the year following the announcement for firms announcing stock splits. The positive drift suggests that stock split has signaling effect. Contrary to above argument, Kadiyala and Vetsuypens (2012) in their study of changes in short-interest positions around stock splits posit that positive stock volumes at split announcements cannot distinguish between signaling and liquidity effects. They argue that,

11 whenever the event that conveys a positive signal also causes contemporaneous liquidity improvements, stock volumes are less useful for testing signaling theories. There is no ambiguity for short interest. They argue that short interest should decline if the event conveys a positive signal as short traders respond to this signal by reducing their short in the firm. On the other hand, liquidity-enhancing splits should cause an increase in short interest. Short traders are exposed to two significant transaction costs: the opportunity cost of the that must be posted by the short seller, and the exposure to a "." A short squeeze occurs when institutional investors take large positions in already heavily shorted stocks and then request delivery of the shares. This transaction reduces the liquidity of the shares and forces a premature closing out of the short position. Thus, short interest represents an appealing metric to test for signaling effects. They present weak evidence that stock splits convey a positive signal. Brennan and Copeland (1988b), McNichols and Dravid (2011), and Brennan and Hughes (2012), linked the positive stock market reaction to share split announcements to managers giving a signal of better times ahead. Brennan and Copeland (1988b) came up with a model of share-split behavior in which the split serves as a costly signal of private information by managers because shares trading costs depend on stock prices. They present empirical findings confirming the relation between stock trading costs and share prices. The signaling model is estimated using a large sample of splits and explains a substantial fraction of the split-announcement returns. McNichols and Dravid (2011) conduct three tests of the hypothesis that managers signal their private information through split factor choice. Their tests of the signaling hypothesis rely on the notion that managers prefer their firms' shares to trade in a certain price range. They document the split factors are increasing in pre-split share prices and decreasing in the pre-split market value of equity. The first relation is consistent with the notion that firms split their shares to bring them into a specific range, and the second is consistent with the idea that larger firms prefer a higher trading range. Signaling explanations are consistent with abnormal increases in stock split and/or dividends around the split. Lamoureux and Poon (2015) present that a split affects several variables, each of which is related to liquidity. First, (explicit) transactions costs are increased by a split. On the other hand, their analysis indicates that splitting stocks have a wider ownership base following the split and also an increase in the number of daily transactions post-split. These two effects may serve to increase a stock's liquidity post-split. They posit the most telling measure of the degree of liquidity is dollar value of shares traded per unit of time.

12

Using this as a measure, they conclude that splits induce permanent reductions in liquidity. A stock split increases liquidity as it lowers the nominal share price, which lowers the cost of a round lot of stock. There is increased number of new shareholders being attracted by the lower share price. Larger volume due to a greater number of shares traded tends to attract broker/dealer attention, which in turn attracts additional attention (Angel, 2015). Leung et al. (2013) did a study to analyze the impact of share splits by using data on intraday as well as insider trading data in Hong Kong market from 1980-to-2000. They found significant abnormal returns around the share split announcement which they attributed the positive reaction to favorable signals and improved the liquidity of the shares. 2.2.3 Trend Before and After the Announcement of New Stock Split News.

Kipronoh (2014) did a study to examine the response to stock market on share split information releases by use of daily price data from the NSE From 2012-to-2013. The event window will be set for 90 days; 45 days before the stock split which is the event, and 45 days after the event date with the event date being denoted by 0. The review utilized the philosophy of event contemplate to test responsiveness of costs to income data releases given a sample of five organizations in the NSE 20-share list. There will be proof of critical strange value response around the income announcement periods recommending that profit announcements do contain significant data. It was found that irregular returns appeared to overwhelm 25 days before the date of income release recommending that there were no broad responses seen in the market. The progressions apparent just were credited to a couple of people who may have been having private and insider data. There was however a float in the aggregate strange returns, 25 days after the declaration, which negates the proficient markets theory proposing that Nairobi securities showcase, does not productively change costs to profit data in view of the tested firms inside the two year time of study. The accompanying hypotheses attempt to clarify the impact of profit announcement on combined stock costs.

In the created markets, many reviews have been directed to test the effectiveness of securities trades as for corporate event announcements. Be that as it may, just not very many reviews have been directed in creating nations. A portion of the select reviews important to the semi-solid productivity are audited here-after: Biais (2013) investigated the response of the Trading Volume Activity (TVA) and Security Returns Variability (SRV) to yearly income announcement with a sample of 143 New York Stock Exchange

13

(NYSE) firms. The outcome showed 33 rate increments in TVA and 61 percent expansion in SRV in profit announcement week over the non-announcement weeks. A review by Lakhal (2015) found that the arbitrary walk speculation suggests that the value developments are for all intents and purposes autonomous of past value development. The review uncovers that the irregular walk speculation might be off base or, at any rate fragmented.

Mugenda (2013) in her paper on the modification of stock cost to half yearly income announcement in India, considered 33 securities which performed well. Obaidullah (2013) detailed that profit demonstrated an expanding pattern much before the announcement week. Solid (2012) investigated security value conduct related with rights issues related occasions and gives confirm on corporate capital structure, capital market effectiveness and event examine approach. The creator reasons that a rights issue of value is viewed as „bad news by financial specialists and a rights issue of completely convertible debenture (FCD) is viewed as neutral' news.

Fama (2015) presented confirm on the way of the profit data passed on by stock splits during 1982-1989; a time of lower swelling and higher genuine financial development. Comes about for 1982-1989 show that the market translates stock splits as signs of resulting profit increment. Dann et al.(2016) did a study on efficiency of the market and found out that EMH remains elusive but simple in principle. It is very hard to profit from just the most extreme violations of market efficiency. The EMH model continues to provide a framework that is widely used by financial economists.

It appears that reasons for a stock split by low priced companies could be explained by neglected firm hypothesis, which seems, by all accounts, to be substantial for the Indian securities exchange. Sponholtz, (2014) investigated the data substance of 580 yearly profit announcements of 197 firms in the period 1966 –1970. The sample choice criteria were predictable to that utilized by Beaver (1968). The measure of data substance was the remaining return. Sponholtz considered the extent of the leftover return and not the course.

After broad analysis of the residuals, Sponholtz reasoned that the yearly income of firms tested have no data content. In his words "regardless of the possibility that the yearly income reports of the tested firms do have data content, the remaining fluctuation data

14 measures are not equipped for catching it. At the end of the day Sponholtz propose that Market Model may not be proper for the sample of firms he chose.

Be that as it may, Sponholtz's decisions could be related with the organizations in the example. Since data is accessible from different hotspots for instance interval reports, profits, rewards and other goofy announcements, unless these different sources are controlled, yearly income report may swing to have no data content. Morse (1981) utilizing a sample of 25 NYSE/ASE stocks and 25 OTC stocks in the period 1973 –1976, investigated the conduct of both the trading volume action and security return changeability. Morse detailed both expanded trading volume action and expanded fluctuation at the season of profit release for both examples. Instead of Grant (1980), more detailed no critical contrasts between NYSE/ASE and the OTC samples for both measures. A conceivable explanation behind this could be the way that Morse's OTC sample was drawn from a population of actively traded securities. All the same the study shows that stock split release for both OTC and NYSE ASE firms have information content.

2.3 Effect of Stock Split Announcement on Stock Volumes 2.3.1 Stock Split Announcements and Trading Volumes

Dasilas et al. (2012) sought to empirically investigate stock price and trading volume reactions to synchronous between time profit and income announcements by the Greek firms quoted on the Athens stock trade (ASE). The traditional philosophy for event studies was locked in to test the response of the offer cost and trading volume in connection to the announcements on interval profits and income. Comes about affirmed the flagging speculation which predicts positive market response to the joint announcements on profit and income.

In any case, the size of the value reaction started by the last profit announcement appeared to be higher than the one by the interval split announcement. Lakhal (2015) looked to inspect whether non-ordered income revelations incorporate esteem important data and influence data asymmetry and securities exchange liquidity. The event think about procedure investigates the educational substance of terrible, unbiased and great deliberate profit releases. The OLS board relapse structure was then used to break down data asymmetry and securities exchange liquidity ensuing to both classes of deliberate profit exposures (i.e. profit estimates and quarterly income exposures).

15

Empirical tests demonstrated that willful income revelations included material data and that terrible news was released in a troublesome manner prompting data spillage in the pre- announcement period. The outcomes moreover showed that quarterly profit upgraded securities exchange liquidity by contracting offer ask spreads. Be that as it may, income conjectures bothered data asymmetry previously, then after the fact the announcement date. This outcome affirmed the presence of data spillage and recommended that administrators have extensive prudence whether to make a conjecture, and in choosing its frame, timing and specificity.

The liquidity speculation recommends that the production of extra shares ought to prompt an expansion in trading and more noteworthy possession scattering, in this manner enhancing liquescency. In any case, in their examination of changes in trading volume after stock profit announcements during the period 1963-1982 by firms quoted on the NYSE and the AMEX, Balachandran, at al (2014) found that while trading volume expanded in the month when the announcement was made, this ascent in volume did not proceed. Lack of proof for the liquidity speculation is additionally revealed in Balachandran, at al (2014) for Danish stocks.

In the contrary, be that as it may, an analysis done on splits in the Canadian market between 1973 and 1992 by Leung, and Wang, (2016) came up with a finding that both trading volumes and stock split increased, post-split. Another study done by Lyroudi and Dasilas (2006) of firms quoted on in the year 1999-to-2000 found evidence of a positive market reaction to share split announcement consistent with the liquidity hypothesis. 2.3.2 Effectiveness of Stock Split Announcement on Stock Liquidity

In Dow and Grover (2001) evaluated the effectiveness of information technology investments. In this study, the researcher examined the adjustments in the market value of the firm as reflected in the stock cost in light of IT speculation announcements. Responses of cost and volume were contrarily identified with firm size and turned out to be more positive after some time. Jijo and Rao (2002) in their review, "Market Reaction to Stock Splits' investigated the response of stock costs around the date of announcement of stock splits and ex-split date.

On the declaration day, there was a return of 5.3% and on day +1, 2.42%. The after effect of irregular returns around the ex-split day which demonstrates that a great split of the

16 anomalous profits did occur for day 0 at 3.68 percent and day +1 at 2.04percent. Ghosh and Woolridge (2014) did a researcher on stock splits and liquidity on account of the NASDAQ - 100 and came up with a finding that the normal day-by-day turnover before the split was approximately 24% and after the split the same came down to 22.81 percent. A "t" test for distinction in mean neglected to dismiss the theory that the turnover before the split (the t- measurement is 0.8) looking at the quantity of merchants prior and then afterward the split. It is evident that there was somewhat less than twice the same number of merchants after the split than some time recently. A review on Market response to securities exchange parts in India by Ghosh and Woolridge (2014) keeps up that stock splits are related with positive irregular returns around the declaration. All things considered parts are found to enhance the trading volume of shares and there was increment in the daily number of traders. But they do not increase the daily turnover and consequently the liquidity of stocks in India. At the end, the author concluded that the majority of shares which underwent split were trading at low market prices.

Harish (2007), took a closer look at share split as an event while studying the efficiency of the Indian market. He did a study on the total strange returns of stocks, which have gone for stock splits for the time of study attempted. The outcomes demonstrated unusual returns during both the pre and post stock splits were measurably not as huge to prompt a conclusion that semi-solid type of effectiveness do not exist in the Indian securities exchange. Dhar et al., (2014) have analyzed the impacts of stock splits and reward issue on the Indian securities exchange.

Additionally, the review has also concentrated the way of productivity of Indian securities exchange. The outcomes have demonstrated that both the occasions are related with essentially positive announcement impact. For the stock splits, the unusual returns are 0.8 for each penny and the paper has discovered semi-solid shape proficiency in the Indian securities exchange. John and Williams (2015) have considered cost and liquidity impact related with stock split encompassing its declaration.

The outcomes have demonstrated that there is critical positive unusual return related with stock split, however it switches in only a couple days after the event day and produces noteworthy negative anomalous returns in a somewhat longer post event days. Taking everything into account, a stock split does not positively affect the abundance of the shareholders and just enhances liquidity of the stocks.

17

The scholars have analyzed the elements, which impact stock split choices in Indian setting. The review has taken a sample of 50 organizations quoted in BSE (Bombay Stock Exchange) during the period 2007. Combined example "t" test was utilized to focus the adjustment in the Profit after Tax (PAT), volume of exchange and Foreign Institutional Investors (FII) possessions before and post stock split date. Comes about have demonstrated that there is emphatically noteworthy change in the benefit after expense, volume of trade and FII possessions amongst pre and post-split date.

A multiple relapse model was developed and the outcomes have demonstrated that Price of shares (5 days before stock split) and volume of trade are the components affecting stock split choices in Indian securities exchange, along these lines showing that organizations with very valued shares split stocks to build volume of trade. However, there is huge change in the PAT between the pre and post stock split period, this element has impacted the stock split choice, in this manner dismissing the theory that stock splits signals enhanced future profit of the organizations. Liquidity theory and trading range speculation are holding useful for the Indian securities exchange (Sriram et al, 2010).

Ranjan et al., (2013) attempted to focus the purposes behind firms offering value ensuing stock splits. They have found no distinction in returns between firms issuing value after stock splits and non-stock split firms during the issue time frame. Since financial specialists respond emphatically to stock split announcements, firms issuing stocks will offer their new issue at a higher cost and raise more subsidizes. The creators have additionally found that organizations split stocks to make their consequent value shares more attractive to the financial specialists who are pulled in by the low estimated shares.

2.3.3 Effects of Stock Split Announcement on the Cost of Stock Volumes

Savitriet al., (2015) investigated the effect of stock split on stock profit and trading volume for Jakarta Stock. Trade between 2001-to-2005. The review has examined anomalous returns and volume during the period around the split and has related stock comes back to productivity, use and volume. It is reasoned that there are noteworthy strange profits for

18 the date of split on the fifth day before split. Trading volume and profit for resource have huge impact on market-balanced returns. Katerinaet al., (2016) showed that the market response to stock split announcements is certain, which infers the supervisors and financial specialists see the stock split as an uplifting news event with respect to the organization. The outcomes are steady with trading extent and liquidity theory. Liljeblom, (2013) examined the heartiness of the outcomes acquired for the conceivable inspiration for quoted firms in the Spanish Market 170 to execute a stock split utilizing diverse philosophies.

Grossman (2016) gave a confirmation on share split announcement that there was no impact on the announcement related with share splits in the Indian market, never the less there existed an articulated ex- day or after split effect. There was also no evidence found for the trading range as a possible explanation for stock splits in India, with most of the shares which underwent a split being traded at low market prices. Therefore it appears that reasons for a stock split by low priced companies could be the neglected firm hypothesis-, which appears to be valid for the Indian stock mark.

Many reviews embraced in different securities exchanges on the globally created blended outcomes. In a large portion of the reviews, stock split announcements elicited positive outcomes. For example, Woolridge (2013) completed an examination on market response to stock split in the German market and discovered overabundance returns during the initial four days taking after the split declaration. A few reviews found that business sectors responded contrarily. Grossman et al. (2013) noticed that organizations that split their stock experienced declining liquidity inside the initial 9 to 12 months. Grossman et al. (2013) discovered declining trading volumes after Stock splits. Others school of thought observed that there was no impact available when stock split announcements were made. Gupta and Kumar (2007) found that there was no impact available related with Stock splits.

This instability about the genuine impact of stock splits announcements on stock costs is the primary motivation behind why the scientist expects to embrace this review. Munyao (2012) concentrated ten firms in the NSE that have led stock splits and found that one firm had its offer cost unaltered, three firms' offer costs diminished though four firms share costs expanded.

In addition, the greater split of the reviews that have been attempted on stock splits were done outside the Kenyan market. The reviews done in Kenya have been excessively few,

19 making it impossible to give a convincing outcome and henceforth the need to do this examination. Mohamed, (2016) found that the idea of stock splits was generally new in the Nairobi Securities Exchange, with the main split regularly having happened in the year 2004. All things considered, very little research has been done in the neighborhood showcase. Moreover, market reaction elicited by stock split announcements as shown by studies done in other countries cannot be generalized to the Kenyan market because of differences in stock market activity, varying economic growth levels, diverse political environments, among others Mugenda and Mugenda, (2013). Hence, there exists a gap.

2.4 Conceptual Framework

A conceptual framework is an essential research tool intended to assist a researcher to develop awareness, understanding and communicate the situation under scrutiny (Maina, 2012). It is very useful in research as it sets the foundation of how concepts are related. It explains, graphically or in narrative form, the main dimensions being studied, or the presumed relationships among them. It is derived from theory to identify the concepts included in the complex phenomena and show relationships.

The relationship among the various variables in the study is as depicted below

Independent variable Dependent variables

Stock split announcement Change in stock price

Change in stock volumes

Figure 2.1: Conceptual Framework

Stock split announcement – This entails the communication of the intention to divide a share

Change in price – A rise or fall in the share price

Change in volumes – A rise or fall in Share volumes

20

2.5 Chapter Summary

The chapter covered introduction to literature review and the effects of stock split announcement on stock prices and stock volumes. Chapter three described research methods and procedures that was used in the study. Chapter four presents results and findings. Chapter five covers discussions, conclusion and recommendations.

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

The chapter discussed the research methodology employed in the study. It detailed the research design, the population studied, the sample and sampling methodology used, the nature of the data collected and the data presentation.

3.2 Research Design

This study adopted a descriptive research design of quantitative data collection method which allows collection of information from the entire population. The descriptive research design seeks to provide the frequency of a given event and it is usually used when the

21 problem is clear and there exist theories and information. This research design was chosen because the study looks into the relationship between stock splits announcement events and stock changes in terms of price and volume.

3.3 Population and Sampling Design 3.3.1 Population

According to Lyroudi and Dasilas (2016) a population is the full set of cases from where the sample is taken. The population needs to have some common observable characteristics altogether. The target population for this study comprise of quoted firms which announced splits from the year 2009 through to 2016.

3.3.2 Sampling Design

3.3.2.1 Sampling Frame

The sampling frame is an objective list of the population from which the researcher can make his/her selection. A sampling frame should contain a complete and up to date list of all that comprise the population for the research (Uddi, 2015). The sampling frame in this study constituted all quoted firms in the study period that met the following conditions: been a quoted company during the period 1st January, 2009 through to 30th December, 2016; be a quoted company; have announced at least one final dividend during the period; must have at least 45 days pre and post announcement price and volume data.

3.3.2.2 Sampling Technique

Census technique was used while sampling the research data. A suitable sampling frame and the actual sample size required were established then the most appropriate sampling technique selected. In this study, the entire sample frame was be taken.

3.3.2.3 Sample Size

According to Sekaran and Bougie, (2010), Sample size is the number of respondents to be studied. Sample size should neither be too large or small but it should be realistic enough to give a confidence interval of desired width (Kothari & Garg, 2014). The study used all quoted firms in the study period that met the following conditions: been a quoted company during the period 1st January, 2009 through to 30th December, 2016;

22

3.4 Data Collection Methods

Secondary data was used to collate data. Data included; share price; stock index (NSE 20 Share index); stock volume and stock split announcement dates from 1st January 2009 to 30th December, 2016. This information was obtained from NSE and CMA. Data was collected through the use of structured data collection sheet from the NSE database and hard copies sent to CMA. Through this, the researcher was able to collect data that would address all the study objectives. The checklist below was used

Data checklist

COMPANY DECLARED Split FactorANN'CED CLOSURE EQUITY BANK SHARE SPLIT 1:10 February 12, 2009 March 25th,2009 KENOLKOBIL SHARE SPLIT 10:1 May 20, 2010 June 1st,2010 BARCLAYS SHARE SPLIT 01:40 February 22, 2011 May 30th,2011 ATHI RIVER MININGSHARE SPLIT 05:10 May 14, 2012 January 7th,2013 CARBACID SHARE SPLIT 01:50 October 23rd,2013 November 15th,2013 LIMURU TEA SHARE SPLIT 01:20 May 12th ,2015 June 25th, 2015 NATION MEDIA GROUPSHARE SPLIT 04:10 March 18th,2012 July 25th, 2012 CMC HOLDINGS SHARE SPLIT 09:20 January 11th, 2009 February 26th,2009 SASINI SHARE SPLIT 07:30 December 18th,2012 February 14th,2012 EABL SHARE SPLIT 07:30 August 27,2009 November 26th, 2009 EAST AFRICAN CABLESSHARE SPLIT 09:20 August 10,2011 September 4th, 2011

3.5 Data Analysis Methods

Statistical Package for Social Science (SPSS) was used as an aid in the analysis. The researcher prefers SPSS because of its ability to cover a wide range of the most common statistical and graphical data analysis and is very systematic. SPSS will be used to create showcase returns, irregular returns and volumes and factual qualities to test noteworthiness.

By and large an event study has four stages. The underlying errand of directing an event study is to characterize the event of intrigue and distinguish event window (- 45 to +45) and control periods/pre and post event window periods (- 45 to-45 and 22 to 43); value of factors in the event window and control period. Computation of the unusual split (cost and volume). This last stage is equivalent to the esteem of the variable in the event window minus the value of the variable in the control period. Finally, a test will be conducted to establish if the component is statistically significant (Louhichi, 2015).

23

3.6 Chapter Summary

The chapter covered introduction to the research methodology, research design, population and sampling design, data collection methods, research procedures and data analysis. The next chapter presents the results and findings of the study.

CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction The objective of this study was to investigate if stock split announicement result in change of share price of public quoted firms and the effect of stock split announcement on the stock volumes of public quoted firms at the Nairobi Securities Exchange for the period 2009 to 2016.

4.2 Descriptive Statistics Based on the table below, the highest split factor of 11 in 2016 followed by 9.2 in 2015. 2012 recorded the lowest split by an average of 5.3. Similarly, 2016 had the highest number of splits given that 4 companies conducted stock splits. The study considered the event window of 90 days consisting of t-45 to t+45 of 20 in Nairobi Securities Exchange

Table 4.1: Descriptive Table

24

Equity Kenol Barclays Athi River Carbacid NMG Sasini EABL Mean 15.35 9.45 16.35 43.01 24.81 181.14 11.79 143.55 Standard Error 0.14 0.11 0.09 0.23 1.12 1.55 0.09 0.49 Median 15.75 9.86 16.50 43.40 19.47 183.86 11.71 142.01 Mode 13.93 9.77 14.29 45.40 18.67 180.00 12.49 150.00 SD 1.34 1.05 0.87 2.20 10.67 14.78 0.84 4.70 Kurtosis - 1.79 - 0.96 0.16 - 0.86 4.19 - 0.35 - 1.24 - 0.32 Skewness 0.05 - 0.67 - 0.71 - 0.18 2.12 - 0.60 - 0.15 0.85 Range 3.80 3.45 3.61 10.00 50.04 60.98 3.24 17.89 Minimum 13.65 7.49 14.25 37.00 17.33 145.37 10.03 137.00

4.3 Normative Test This study defined the period to be studied (2009 to 2016) and determined the exact day of announcement of the earnings and made this day zero. In this research 45 days before the announcement and 45 days after the announcements was define as the event window and the returns of the window were used to compute daily abnormal positive or negative returns for all firms under investigation. Daily returns was calculated by using models mentioned in the research methodology to find out actual daily returns and were compared with estimated daily market returns for the same period to ascertain if there were abnormal returns for each day during the 45 day event window. The research expected that the magnitude of the effect of stock split announcement to vary across the firms because such announcements made by the firms indifferent industries at different times. In which case, it is useful examining individual firm behavior.

From the table ,The mean, Mode and median were as indicated in the table with no major deviations for each company apart from Carbacid and Nation media Group which had a standard deviation of 10. And 14.7 which owed to the high share prices before the split.

The data was normally distributed for all the variables as revealed by the skewness levels which all were near zero.

As per the data, the kurtosis results indicate the data was within the same range and normally distributed.

Analysis of the findings was done using Excel and SPSS. Excel was used in the data compilation while SPSS was used for final statistical data analysis. Also, parametric t-test was used to determine the statistical significance of market adjusted

25 average investors’ return; and stock volume of stock split announcement over the window period (-45 day to +45day relative to earnings announcement).

4.4 Change of Share Price Table 4.2 presents the t-test results for Change f share price from 45 days before and 45days after announcements for the listed companies. The result shows that the change in share price is statistically significant at the 5% level: p value 0.001258 < 0.05.

Table 4.2: T-test Paired Two Sample for Change of Share Prices

Factor Price Mean 0.155909 Mode 0.144700 Median 0.143757 Variance 0.063006 Std Deviation 0.06 Observations 13 Pearson Correlation 0.10128 Hypothesized Mean Difference 0 Df 42 t Stat 3.458378 P(T<=t) two-tail 0.001258

Price reaction to announcements using daily stock prices around the announcement dates is consistent with findings by Onyangoh (2014); Maina (2013); and Mohamed (2013) but contrary to Ondigo (2015).

The results of the study show that the stock split announcement contain relevant information to affect prices of shares which are fully impounded in change of stock prices prior to or almost instantaneously at the time of announcement. Secondary evidence resulting from this study is the conclusion that NSE shows presence of semi strong model of EMH. This is contrary to early evidence adduced by the study of Ondigo (2015).

4.5 Average Stock Volume Average Stock Volume from 45 days before and 45 days after announcements for the earnings announcing firms. The event being studied is the stock split announcement and

26 their effect on share prices and stock volume. The study therefore examines the returns before and after the stock split announcement. The day of announcement is denoted as day zero.

This section is a presentation of detailed data analyses that was carried out and includes the findings of the research. The study sought to investigate the effect of stock split announcement of listed firms. The model: Pit –Pit-1 / Pit-1 was used to determine the actual daily positive/negative abnormal returns (Rit). Thereafter, the notation: Iit –Iit-1/Iit-1 to calculate daily expected market returns (Rmt). The expression: Rit–Rmt was finally used to calculate the positive or negative abnormal returns. The results from MAAR provided the empirical evidence regarding the relationship among returns and were further tested at the 5% level of significance to ascertain if the differences were significant.

Daily NSE 20 share index price chosen to be the yard stick for abnormal return either positive or negative. NSE 20 share index price is the share price of selected listed twenty firms in case a firm is suspended another one selected by following the selection criteria.

The findings from table 4.3 of variables value of 0.002419<0.05 at the 5% level of significance indicates that there is a significant difference between stock and market returns during the window period. This implies that the announcement of earnings normally carries surprise to the market. It is also worth noting that there is existence of both negative and positive returns which could be reflective of good and bad signaling from the stock split announcement. These results strongly suggest that the effect of stock split announcement is strong in Nairobi Securities Exchange.

Table 4.3: T-test Paired Two Sample for Average Stock Volume (ASV)

Factor Volume 0.019613 Mean 0.004854 Mode 30 Median 27 Observations 42 Pearson Correlation 0.126033 Hypothesized Mean Difference 0 Df 41

27

T Stat 3.233155 P(T<=t) two-tail 0.002419

EABL stock split was conducted in 2011 and as observed from the figure 4.2 share price reacted sharply both in pre and post stock split for the company. It took 20 days for the share price to regain its value after the split

For CMC holdings, there is no increase in share price before the stock split a finding by Angel (1997) Stock splits have zero impact on a firms value and are meant to keep the shares of the company within an optimal range to make it affordable and hence increase liquidity. This is evidenced by the increase in the share price of CMC after the split where the price increases majorly as a reaction to demand and supply of the market forces.

KCB share split had a minimal impact on the share price movement an indication that stock splits have no impact on share price.

Nation group share prices rose steadily during the pre and post-split period -45 to +45.This means that share split had no effect which can be used to conclude that the market is efficient and news are absorbed in the market effectively which in other words is referred to as information Asymmetry.

KenolKobil is seen as sensitive in both pre and post-split. A decrease is observed before t0 which could be attributed to panic among shareholders and investors as to the reason of the split. The increase after stock split could be again pegged to confirmation that the news spread alluding to the split were false and the obvious affordability of the shares

28

Figure 4.1: Reaction of Share Price to Share Split Announcement

4.5 Chapter Summary This chapter reports the findings of the study highlighting the findings for each study question. The effects of share split announcement on stock prices and stock prices respectively. Chapter five provides the conclusion, summary as well as the discussions and the recommendations.

29

CHAPTER FIVE

5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction This chapter discusses the findings of the study, recommendations from the study are then given, limitations of the study are then discussed, and finally suggestions for further research are given.

5.2 Summary The general objective of this study was to examine effects of stock split announcements on stock prices of public quoted firms in Kenya. The purpose of this study was to establish the effects of stock split announcement on stock prices of public quoted firms in Kenya. The study was guided by the following research questions; does stock split announcement result in change of share price of public quoted firms in Kenya? and What is the effect of stock split announcement on the stock volumes of public quoted firms in Kenya?

Descriptive research design was used. This is because descriptive research design seeks to provide the frequency of a given event and it is usually used when the problem is clear and there exist theories and information. The target population comprised of quoted firms which announced splits from the year 2009 through to 2016. Secondary data was used to collect data from NSE and CMA. Data was collected through the use of structured data collection sheet from the NSE database and hard copies sent to CMA. Statistical Package for Social Science (SPSS) was used to analysis data.

The mean adjusted model was used to do the analysis with the results being tested for significance using a t-test. The Market Adjusted Abnormal Returns were found to be significant by having a p value of 0.002419 < 0.05 at the 5% significance level which indicated that there is a significant difference between individual Shares and the market volumes during the window/study period. The findings indicated that individual Share prices of firms react to stock split announcement. The study also found Cumulative Abnormal Returns to be statistically significant at the 5% level with a p value 0.001258 < 0.05 indicating that there is a significant difference between cumulative Shares and market volumes during the window period. The findings indicated that cumulative Share prices of firms react to stock split announcement.

30

Finally, the study paradoxically found that Share volumes were statistically insignificant at the 5% level with a p value 0.459772 > 0.05. This meant that Share volumes were not significantly affected by stock split announcement and did not instantly react to earnings announcement.

5.3 Discussion A discussion based on the study research objectives in comparison to the literature review will be provided in this section. This section interpreted the results in respect to the two research questions.

5.3.1 Effect of Earning Announcement on Share Prices

There was unpredictability with positive returns on some days and negative on some others. The scenario points to the existence of Random Walk Theory whereby prices are unpredictable; whereby chartists cannot make abnormal returns. According to Fama (1970), a Random-Walk market is a market where successive price changes in individual securities are independent.

This implies that a series of changes in Share price is not pegged to the past history of the series and neither can it be used to predict the future in a meaningful way. If the successive price changes for any given security are independent then there is no problem in timing purchases and sales of a security.

The elementary assumption of the chartist or technical theories is that history is likely to replicate itself implying that past trends of price behavior in individual securities will probably recur in the future. Consequently, the manner to forecast Share prices and to hopefully increase their potential gain is to cultivate awareness with historical patterns of price behavior so as to spot conditions of likely recurrence.

Even though the processes generating Share volume may be modeled as a random walk if capital markets are efficient, investors might expect a general drift in volumes; that is, one might expect that investors will earn a "normal" volume on their securities. The existence of positive and negative returns on alternate days is indicative of fairly fast adjustment of prices. This sign shows that the Nairobi Securities Exchange is a semi strong in terms of capturing new information and price pattern predictability. When a market is semi strong, prices of Share reflect publicly available new information rapidly

31 in an unbiased fashion such that no excess volumes can be earned by trading on that information for example the announcement of annual earnings, Share splits among others.

The meaning of this is that neither nor techniques will be able to reliably produce excess volumes. When the market is semi strong, chartists hardly benefit from events like earnings, dividend, Share split, merger, etc. announcements. This scenario is reflective of a fairly efficient market where prices adjust fairly fast enough and thus Share prices remain reflective of market fundamentals.

Market efficiency is a condition whereby all publicly available information is reflected in the share price making it difficult for an investor to gain abnormal returns by exclusively trading on the information. The sole assumption in this market is that buyers and sellers are rational and information is free. Competition is expected to drive all the information quickly enough into the market. (Capital Market Efficiency, 2014).

5.3.2 Effect of Earning Announcement on Stock Volume

The findings of this study indicates that stock/share volumes did not react quickly enough to share split announcement. This is contrary to several similar findings on the same subject matter with specific focus on volumes. This can be variously explained but one possible explanation is that investors take time to watch price movements before offloading or increasing their Shares.

The results of the study generally showed that the stock split announcement contain relevant information to investors which are fully impounded in Share prices prior to or almost instantaneously at the time of announcement. The returns were, however, slower in reaction. This study is in agreement with Dasilaset al. (2008) in their study where they sought to investigate Share price and stock volume reactions to simultaneous interim dividend and stock split announcement at the Athen Securities exchange confirmed the signaling hypothesis which predicts positive market reaction to the joint announcements on stock and earnings.

In his findings, Lakhal (2008) indicated that quarterly earnings enhanced Share by shrinking bid-ask spreads. He however noted that earnings forecasts aggravated information asymmetry before and after the announcement date. This result confirmed the existence of information leakage and suggested that managers have considerable discretion whether to make a forecast as well deciding its form, timing and specificity.

32

In support of the bird in hand theory, the study supports the view that earnings announcement sends an unambiguous message that where the changes are positive, the companies are confident of even better returns in the future. By the same token, negative changes in earnings gives a sign that in the future, earnings may keep on dwindling and they are not guaranteed.

5.4 Conclusion 5.4.1 Effect of Earning Announcement on Share Prices

The objective was to establish how earnings announcements affect Share prices and indeed the study established that individual Share prices react either way (Gains or losses) to stock split announcement . It can thus be concluded that the market is fairly efficient since individual Shares react instantly to stock split announcement .

The objective was to establish how stock split announcement affect Share prices and indeed the study established that Share prices react either way to stock split announcement depending on the nature of the news (good or bad). It can thus be concluded that the market is fairly efficient since Shares react instantly to stock split announcement.

5.4.2 Effect of Earning Announcement on Stock volume

The objective was to establish how stock split announcement affect Share volumes and indeed the study established that Share volumes do not instantly react either way to stock split announcement. It can thus be concluded that unlike share prices where new information is fairly quickly reflected in fundamental Share prices, Stock volume react much slower. This can be attributed to a wait and see approach and only offload or acquire Share on the basis of a more sustained pattern.

5.5 Recommendations Below are the recommendations for future improvement based on the research objectives.

5.5.1 Recommendations for Improvement

5.5.1.1Effect of Earning Announcement Share Prices

Considering that it is difficult to have a perfect research situation it is expected that this research will have some limitations. Limitations of this study include first, not all firms were included in the sample as would have been the ideal situation and would have

33 been more representative. Secondly, acquisition and compilation of the data for analysis was exceedingly tedious; this involved finding the daily actual returns, finding daily NSE 20 Share index returns; comparing both returns before estimating the abnormal returns for all firms listed at the Nairobi Share Exchange; computing average volumes and testing for significance.

Admittedly, the sample was smaller than intended primarily on the absence of data in some instances and therefore the firms in question may have been omitted on that basis. In addition, the compilation of data thought satisfactory had gaps here or there but not significantly.

5.5.1.2 Effect of Earning Announcement on Stock Volume

The study covered a span of four years. Perhaps a longer duration could have yielded more return for investors. Again, many other things can affect the Share prices of listed companies like weekend effects, January effect, but in this case only share prices was considered and yet the announcements may not have been the only factor impacting on prices.

5.5.2 Recommendations for Further Research

Most event studies at the NSE have been undertaken by using the NSE 20 share index as a proxy, future studies should use the NASI all-share index which is more reflective of the Share market. This may enable a proper assessment of the NSE index as a proxy. In future studies on other models other then return analysis should be employed and data should also cover a longer period. Also, more studies should be conducted to ascertain why this study registered mixed results with respect the effect of earnings announcements on prices as significant while the effect on volume was insignificant.

REFERENCES

Ambarish, R., K. John, & J. Williams, “Efficient Signaling with Dividends and Investment’’, Journal of Finance 42, (1987).

34

Anderson, H., Cahan, S. & Rose, L.C. (2011). Stock Dividend in an Imputation Tax Environment. Journal of Business Finance & Accounting, 28(5), 653-669. Announcements for Quoted Companies at NSE .Unpublished MBA thesis, University of Nairobi.

Aydogan, K & Muradoglu, G. 1998. Do markets learn from experience? Price reaction to stock dividends in the Turkish markets. Applied Financial Economics, 8: 41–9.

Balachandran, B., Faff, R. & Tanner, S. (2014). Further Evidence on the Announcement. Effect of Bonus Shares in an Imputation Tax Setting. Global Finance Journal, 15(2), 147-170.

Biais, B., Hillion, P. & Brooks, C. (2013). Price Discovery and Learning during the Pre- opening period in the Paris Bourse. Journal of Political Economy, 107, 1218-1248.

Chen, G., Firth, M. & Gao, N. (2012). The Information Content of Concurrently Announced Earnings, Cash Dividends, and Stock Dividends: An Investigation of the Chinese Stock Market. Journal of International Financial Management and Accounting, 13(2), 101-124.

Dann, L., Mayers,D. & Raab, R. (2016). Trading Rules, Large Blocks and the Speed of Adjustment. Journal of Financial Economics, 4, 3-22.Cuts: Are Investors Myopic. Managerial and Decision Economics, 10(1), 25-35.

Dasilas, A., Lyroudi, K. & Ginoglou, D. (2012). Joint Effects of Interim Dividend and Stock split Announcement in Greece. Studies in Economics and Finance, 25(4), 212-232.

Denscombe, M. (2015). The Good Research Guide (4 ed.).Bershire,, England: Open

Dhar, Satyajit & Chhaochharia, Sweta, Market Reaction Around the Stock Splits and Bonus Issues: Some Indian Evidence (January 24, 2008).

Doran, D.T. & Nachtmann, R. (2013). The Association of Stock Distribution Announcements and Stock split Performance. Journal of Accounting, Auditing &Finance, 3, 113-132. Dividends: Evidence on the Retained Stock split Hypothesis. Journal of Business Finance and Accounting, 34(3/4), 574

35

Elfakhani, S. & Lung, T. (2013). The Effect of Split Announcements on Canadian Stocks.Global Finance Journal, 14, 197-216.

Fama, E. F. (2011). Efficient Capital Markets: II. Journal of Finance, 46(5), 1575-1617.

Fama, E. F. (2015). Random Walks in Stock Market Prices. Financial Analysts Journal, 55- 59. Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, 25, 383-417.

Francis, J., Pagach, D. & Stephan, J. (2012). The Stock Market Response to Stock split Announcements Released during Trading Versus Non Trading Periods. Journal of Accounting Research, 30, 165-184.

Galariotis, E. G. & Giouvris, E. (2014). Systematic Liquidity and Excess Returns: Evidence from the NASDAQ Preopening. Journal of Finance, 55, 1339-1365. Capital Market Efficiency.

Ghosh, C. & Woolridge, J. R. (2014). Stock Market Reaction to Growth- Induced Dividend

Gitman, L. J. (2015). Principles of Managerial Finance (14 ed.). The Case of Overnight and Daytime News Releases. Financial Management, 25, 19-42.42

Grinblatt., F., Fisher, L., Jensen, M. C. & Roll, R. (2013). The Adjustment of Stock Prices to the New Information. International Economic Review, 10(1),1-21. Farinha, J. &Basilio, N. F. (2006). Stock Splits: Real Effects or Just a Question of Maths?

Grinblatt, M.S., Masulis, R.W. &Titman, S. (2014). The Valuation Effects of Stock Splits and Stock Dividends. Journal of Financial Economics, 13 (4), 461 -490.

Grossman, S. (2016). On the Efficiency of Competitive Stock Markets where Trades have Diverse Information. Journal of Finance, 31, 573-585.

Grossman, S.J. &Stiglitz, J.E. (2013). On the Impossibility of Informational Efficient Markets. American Economic Review, 70, 393 -408.

Ikenberry, D.L., Rankine, G. & Stice, E. K. (2016). What do Stock Splits Really Signal? Journal of Financial and Quantitative Analysis, 31(3), 357-375. Issues: Some

36

Indian Evidence. Journal of Business, 34, 411-343.41 Investments. Journal of Finance, 42, 321-343.

John, K. & Williams, J. (2015). Dividends, Dilution and Taxes: A Signaling Equilibrium.

Kipronoh, P. (2014). Stock Price Response to Stock split Announcements at the Nairobi Securities Exchange. Unpublished MBA Thesis, University of Nairobi. Journal ofFinance, 40, 793-805.

Lakhal, F. (2015). Stock Market Liquidity and Information Asymmetry Around Voluntary

Lakonishok, J. & Lev, B. (2013). Stock Splits and Stock Dividends: Why, Who and When. Journal of Finance, 42(4), 913-932.

Lamoureux, C.G. & Poon, P. (2012). The Market Reaction to Stock Splits. Journal of Finance, 42(5), 1347-1370.

Leung, T.Y., Rui, O.M. & Wang, S.S. (2016). "Do stock splits really signal?” MA Annual Meeting. Retrieved from www.fma.org/SLC/Papers/DoStockSplitsReallySignal.pdf

Liljeblom, E. (2013). The Informational Impact of Announcements of Stock Dividends and Stock Splits. Journal of Business Finance & Accounting, 16(50), 681-697.43

Lishenga, L. (2015). An Analysis of the Relationship between Certain Corporate Attributes ad Timeliness of Annual Reports of Companies Quoted at the NSE. Unpublished MBA

Loulichi, W. (2013). Adjustment of Stock Prices to Stock split Announcements: Evidence from Euronext Paris. Review of Accounting and Finance, 7(1), 102-115.

Lyroudi, K. &Dasilas, A. (2016). The Valuation Effects of Stock Splits in NASDAQ.

Maina, J. (2012). An Empirical Investigation of Stock volumes Reaction around Stock split

McNichols, M. & Dravid, A. (2013). Stock Dividends, Stock Splits, and Signaling. Journal of Finance, 45(3), 857-879. Managerial Finance, 32 (5), 401-414.

37

Miller, M. H. & Rock, K. (2015). Dividend Policy under Asymmetric Information. Journal of Finance, 40(4), 1031-1051.

Miller, M. H. & Modigliani, F. (2013). Dividend Policy Growth and the valuation of Shares.

Mohamed, M. H. (2010). The effect of the earnings announcements on the stock prices of companies listed at the Nairobi Stock Exchange, Unpublished MBA project, University of Nairobi.

Mugenda, O. M. & Mugenda, A. G. (2013). Research Methods: Quantitative and Qualitative Approaches. Nairobi: Acts Press. Nairobi Securities Exchange Yearbook. (2013).44Nairobi.

Nachtmann, R.A. (2015). Stock Splits and the Efficiency of the Nigerian Stock Market. Companies Listed at the Nairobi Stock Exchange. Unpublished MBA thesis, University of Nairobi.

Nairobi securities Exchange (NSE), 2016. History of Organization, Nairobi Securities Exchange Handbook, NSE.

Olouch W. O. (2013). The Timing Effect of Stock split Announcement on Stock volumes of Nigeria and their Information Content. Managerial Finance, 37(3), 295-311.

Omenda, P.A (2011). Effects of stock splits on liquidity of companies listed in NSE. Journal of Accounting and economics 31, 405 – 440.

Ondigo H. O. (2015). The information Content of Annual Reports and Accounts: An Empirical Test. Unpublished MBA Project, University of Nairobi.

Onyango, P. N. (2014). Stock Price Responses to Stock split Announcements: Evidence from the Nairobi Stock Exchange. Unpublished MBA Thesis, University of Nairobi.

Sponholtz, C. (2014). The Information Content of Stocksplit Announcements in Denmark. International Journal of Managerial Finance, 4(1), 4-36. Shares. Journal of Business, 34, 411-. Role of Volume. Journal of Finance, 49(1), 153-181.40 Quarterly Journal of Economics, August, 1-24. Project, University of Nairobi.

38

Strong, N. (2012). Modelling Abnormal Returns: A Review Article. Journal of Business Finance & Accounting, 19(4), 533-553.

Uddi, H. M. (2015). Re-examination of Stock Liquidity with a Relative Measure. Studies in Economics and Finance, 26(1), 24-35. Stock Dividends in the Turkish Market. Applied Financial Economics, 8, 4149.

Verrecchia, R.E. (2012). Essays on Disclosure. Journal of Accounting and Economics, 32,97-180.University Press.

Woolridge, R. J. (2013). Ex-date Stock Price Adjustment to Stock Dividends: A Note. The Journal of Finance, 38(1), 247-25

APPENDICES Appendix I: Letter of Introduction June, 2017

Dear respondent,

I am a student at United States International University Africa (USIU-Africa) pursuing a Masters of Business Administration program. In partial fulfillment of my course work, I would like to conduct a research project to assess the EFFECTS OF STOCK SPLIT ANNOUNCEMENTS ON STOCK PRICES OFPUBLIC QUOTED FIRMS IN KENYA

39

I need data on stock prices and volumes (-45 to +45 days) of the dividend announcement dates. One dividend per company per period would be sufficient. I also need the exact announcement dates and finally NSE share price indices for the period.

Your assistance is highly appreciated. Thank you.

Yours faithfully,

KEFA NGOIRI

Appendix II: Study Sample

NO. Quoted Firm 1 KENYA AIRWAYS

2 STANDARD GROUP LIMITED

3 BAT

4 EABL 5 PORTLAND CEMEN

40

6 ACCESS KENYA

7 CAR AND GENERAL

8 REAL VIPINGO

9 UCHUMI

10 KENOL KOBIL

11 WILLIAMSONS TEA

12 NATION MEDIA GROUP

13 KENGEN

14 ATHI RIVER MINING

15 TOTAL KENYA 16 SFARICOM LTD.

17 LIBERTY KENYA LIMITED

18 MUMIAS SUGAR COMPANY

19 CARBACID

20 SASINI

Appendix III: Data Collection Sheet

Stock Price and Volume Reaction to Stock split Announcements

FIRM NAME ……………………………………………………… DAY DAILY STOCK NSE 20 SHARE VOLUME OF PRICES INDEX AVERAGE STOCKS TRADED AVERAGE -45 -44 -43 -42 -41 -40 -39 -38 -37 -36

41

-35 -34 -33 -32 -31 -30 -29 -28 -27 -26 -25 -24 -23 -22 -21 -20 -19 -18 -17 -16 -15 -14 -13 -12 -11 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12

42

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45

Appendix IV: Change of share price of Financial Companies Listed at NSE over a window period starting from day -45 to day +45 relative to Earnings Announcements day (0-day)

Stock volume

DAY Event Window Average Market Proxy Average

-45 0.588393 0.101481

-44 -0.129278577 0.101481

43

-43 -0.051303564 0.00326

-42 0.026671448 0.00326

-41 0.057813 -0.062220667

-40 0.067363 -0.111331167

-39 0.436738459 -0.160441667

-38 0.424300812 -0.209552167

-37 0.411863166 -0.258662667

-36 0.399425519 -0.307773167

-35 0.386987872 -0.356883667

-34 0.374550225 -0.405994167

-33 0.362112578 -0.455104667

-32 0.349674931 -0.504215167

-31 0.337237284 -0.553325667

-30 0.324799638 -0.602436167

-29 0.312361991 -0.651546667

-28 0.299924344 -0.700657167

-27 0.287486697 -0.749767667

-26 0.27504905 0.003207

-25 0.262611403 0.006168

-24 0.250173756 0.009129

-23 0.23773611 0.01209

-22 0.225298463 0.315056467

-21 0.212860816 0.4680202

-20 0.200423169 0.620983933

-19 0.187985522 0.773947667

44

-18 0.175547875 0.9269114

-17 0.163110228 -0.020775

-16 0.150672582 -0.9684614

-15 0.138234935 -1.9161478

-14 0.125797288 -2.8638342

-13 0.206007 0.00165

-12 0.221101 0.00165

-11 0.003893 0.012

-10 0.00862 0.01545

-9 0.011075 0.020625

-8 0.00547 0.0258

-7 -0.000135 0.030975

-6 -0.00574 0.03615

-5 0.00547 0.041325

-4 0.01668 0.0465

-3 0.02789 0.051675

-2 0.0391 0.05685

-1 0.05031 0.062025

0 0.35495 0.096217

1 0.35495 0.000603

2 0.019343 0.000603

3 0.015646 0.003848

4 0.011949 0.007093

5 0.008252 0.003848

6 0.004555 0.006667

45

7 0.000858 0.004967

8 -0.002839 0.003405

9 -0.006536 0.001751

10 -0.010233 0.00012

11 -0.01393 -0.001511

12 -0.017627 -0.003142

13 -0.021324 -0.004773

14 -0.025021 -0.006404

15 -0.028718 -0.008035

16 -0.032415 -0.009666

17 -0.036112 -0.011297

18 -0.039809 -0.012928

19 -0.043506 -0.014559

20 -0.047203 -0.01619

21 -0.0509 -0.017821

22 -0.054597 -0.019452

23 0.040953 -0.021083

24 0.001384 -0.022714

25 0.003602 -0.024345

26 0.010976 -0.025976

27 0.014912667 -0.027607

28 0.019708667 -0.029238

29 0.024504667 -0.030869

30 0.029300667 -0.0325

31 0.034096667 -0.034131

46

32 0.038892667 0.050855

33 0.043688667 -0.037393

34 0.048484667 -0.125641

35 0.053280667 -0.213889

36 0.058076667 -0.302137

37 0.062872667 -0.390385

38 0.067668667 -0.478633

39 0.00526 0.001417

40 0.00108 0.001695

41 -0.041919111 0.197596

42 -0.075213444 0.363225

43 -0.108507778 0.528854

44 -0.141802111 0.694483

45 -0.175096444 0.860112

Appendix V: Stock volume of Financial Companies Listed at NSE over a window period starting from day -45 to day +45 relative to Stock Split Announcements day (0-day).

Stock volume

DAY Event Window Average Market Proxy Average

-45 0.019613 -0.00286

-44 0.029163 0.003383

-43 0.022214 0.000588

-42 0.009785 -0.00076

-41 0.024879 -0.00011

-40 0.039973 -0.000792

47

-39 0.055067 -0.001141

-38 0.070161 -0.00149

-37 0.085255 -0.001839

-36 0.100349 -0.002188

-35 0.115443 -0.002537

-34 0.130537 -0.002886

-33 0.145631 -0.003235

-32 0.160725 -0.003584

-31 0.175819 -0.003933

-30 -0.000792 -0.004282

-29 -0.001141 -0.004631

-28 -0.00149 -0.002715

-27 -0.001839 0.000246

-26 0.009785 0.003207

-25 0.024879 0.006168

-24 0.039973 0.009129

-23 0.055067 0.01209

-22 0.070161 -0.04665

-21 0.085255 -0.041475

-20 0.100349 -0.0363

-19 0.115443 -0.031125

-18 0.130537 -0.02595

-17 0.145631 -0.020775

-16 0.160725 -0.0156

-15 0.175819 -0.010425

-14 0.190913 -0.00525

-13 0.206007 0.00165

-12 0.221101 0.00165

48

-11 0.003893 0.012

-10 0.00862 0.01545

-9 0.011075 0.020625

-8 0.00547 0.0258

-7 -0.000135 0.030975

-6 -0.00574 0.03615

-5 0.00547 0.041325

-4 0.01668 0.0465

-3 0.02789 0.051675

-2 0.0391 0.05685

-1 0.05031 0.062025

0 0.01183 0.003207

1 0.02304 0.000603

2 0.019343 0.000603

3 0.015646 0.003848

4 0.011949 0.007093

5 0.008252 0.003848

6 0.004555 0.006667

7 0.000858 0.004967

8 -0.002839 0.003405

9 -0.006536 0.001751

10 -0.010233 0.00012

11 -0.01393 -0.001511

12 -0.017627 -0.003142

13 -0.021324 -0.004773

14 -0.025021 -0.006404

15 -0.028718 -0.008035

16 -0.032415 -0.009666

49

17 -0.036112 -0.011297

18 -0.039809 -0.012928

19 -0.043506 -0.014559

20 -0.047203 -0.01619

21 -0.0509 -0.017821

22 -0.054597 -0.019452

23 -0.021083

24 0.001384 -0.022714

25 0.003602 -0.024345

26 0.010976 -0.025976

27 0.014912667 -0.027607

28 0.019708667 -0.029238

29 0.024504667 -0.030869

30 0.029300667 -0.0325

31 0.034096667 -0.034131

32 0.038892667 -0.035762

33 0.043688667 -0.037393

34 0.048484667 -0.039024

35 0.053280667 -0.040655

36 0.058076667 -0.042286

37 0.062872667 -0.043917

38 0.067668667 -0.045548

39 0.00526 0.001417

40 0.00108 0.001695

41 -0.041919111 0.001973

42 -0.075213444 0.002251

43 -0.108507778 0.002529

44 -0.141802111 0.002807

50

45 -0.175096444 0.003085

51