What is it about?
We argue that these companies, compared to their counterparts, could use their strong corporate social responsibility (CSR) performance to reduce information asymmetry with shareholders, and therefore, are less likely to rely on stock splits to signal their future growth potentials.
Featured Image
Why is it important?
The impact of stock splits on shareholder value has long been examined in the finance literature. However, the relationship between stock split and stakeholders' interests is not yet examined. We argue that CSR performance provides an alternative communication channel to reduce information asymmetry with shareholders, and therefore, CSR oriented firms are less likely to rely on stock splits to signal their future potentials.
Perspectives
We find that firms’ CSR score is negatively related with the likelihood of a stock split. We further investigate and find that more socially responsible firms tend to attract a certain type of institutional investor, namely dedicated and quasi-indexers, who have longer investment horizons. Socially responsible firms are relatively unattractive to transient investors who focus only on short-term returns. We find that a stock split, more socially responsible firms have smaller increases in trading volume and greater changes in bid-ask spreads, suggesting lower benefits (higher costs) from a stock split than those of less socially responsible firms. We find no significant difference in the change in excess returns following the split for both subsamples of more and less socially responsible firms.
Dr Maretno Agus Harjoto
Graziadio Business School - Pepperdine University
Read the Original
This page is a summary of: Corporate social responsibility and stock split, Review of Quantitative Finance and Accounting, August 2018, Springer Science + Business Media,
DOI: 10.1007/s11156-018-0759-9.
You can read the full text:
Contributors
The following have contributed to this page
