Stock splits and insider trading

Abstract

We use daily trading, insider trading, and high-frequency intraday bid-ask data to investigate the effect of stock splits and insider trading on share prices in Hong Kong. We fi nd positive price reactions to stock splits and conclude that these may be attributable to the favourable signals that stock splits send and the improved liquidity they provide. Second, we fi nd abnormally high levels of insider trading activity three to four months before the split announcement and in the post-announcement period. As fi rms usually make their stock split decisions several months before making the announcement, this fi nding suggests that insiders trade on private information in advance of public disclosure. Moreover, we fi nd that the combination of insider purchases and stock splits induces cumulative abnormal returns that are signifi cantly positive. Overall, our results indicate that fi rms use stock splits as a signalling mechanism aimed at increasing liquidity and realigning the fi rm’s share price to an optimal trading range. 本文利用每日交易、內幕交易和高頻買賣價差數據，研究股票分拆和內幕交易對香 港市場股票價格的影響。我們發現股票分拆對價格有正面影響，這一結果可歸因為 股票分拆傳達了利好信號、並改善了股票的流動性。其次，我們發現在分拆公告前 三到四個月以及分拆後的一段時間內，內幕交易活動異常頻繁。考慮到公司一般在 公告前數月做出股票分拆的決定，這一現象意味着基於私人信息的內幕人交易先行 於信息的公開披露。最後，本文發現內幕交易和股票分拆結合在一起可導致顯著正 的累積異常收益。總體而言，我們的結果表明上市公司利用股票分拆作為旨在增加 流動性、且將公司股價調整至最優交易區間的一種信號機制。