The Impact of Stock Dividends and Stock Splits on Shares’ Prices: Evidence from Egypt

Osama Abd ElKhalek El Ansary, Mervat Hussien El-Azab


This research aims to examine the effect of two types of corporate actions,“Stock Split” and “Stock Dividends”, on the shares’ prices, liquidity changes, and price volatility; and to investigate the efficiency of the Egyptian stock market in response to the announcement of the corporate actions. The research provides the investors with a scientific tool to predict and explain changes in stock prices in response to announced corporate actions and to improve their investment decision-making process.

The objective is to investigate whether the two actions collectively or independently have a positive impact on the prices of the related stocks listed on the Egyptian Stock Exchange (EGX), and assess the similarities and dissimilarities between their individual impacts.

We applied the “Event Study” approach to measure the impact of the stock splits and stock dividends announcement on the stock prices through measuring the cumulated average abnormal return (CAAR) resulted from events to assess their impact on the stock performance around the announcement day (for a period of 30 prior and 30 days post announcement) as applied before by Terhi (2011).  

The analysis concluded that the announcement of both of stock split and stock dividend has a positive impact on stock prices. This positive impact drove the authors to test the efficiency of EGX in respect of the impact of the announcement the corporate actions to the public investors. A correlation analysis is performed to reflect this impact. 

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