Prior research (e.g., Baker and Gallagher, 1980; Lakonishok and Lev, 1987; Conroy and Harris, 1999) suggests that firms split stocks to move share price toward the optimal level.
Brennan and Hughes (1991) argue that firms may occasionally reverse split stocks to signal bad information.
In India, SEBI (Securities Exchange Board of India) permitted stock splits in the year 1999 and a lot of companies have split stocks since then.
In India, empirical studies have shown that corporates split stocks to gain the attention of retail investors (i.e., penchant for attention) (Gupta Amitabh et al., 2007).
Most firms elect to reverse split stocks
in order to regain the minimum price required to maintain a listing on the NYSE and NASDAQ.
This means the split stocks
are free from any other announcement effects such as cash dividends, bonus issues, right issues etc.
A sizeable body of research indicates reverse split stocks
don't perform well post-split, but there are some exceptions.
You can't split stocks
until you know whether you can sell them.
The move (by QFMA to split stocks
) also comes in the wake of two exchange traded funds (sponsored by Doha Bank and Masraf Al Rayan), which have been well received by the investors.
First, if some firms split their stocks to keep their equity value from falling (perhaps to delay a market correction of their overvalued equity), we expect these firms to have poorer long-run stock performance compared with firms that split stocks
for nonmanipulative reasons.
Companies for which high share price is driven by performance will split stocks
. Since price moves as a function of demand, the stock split announcement can cause a stock price to rise as there is a psychological increase in demand for shares."
"Globally, the macroeconomic growth has been broadly supportive for QNB Group," its chairman and Minister of Finance HE Ali Shareef Al-Emadi told shareholders at the general assembly meeting, which approved 60% cash dividend and the proposal to split stocks
in 1:10 ratio.