Stock Splits' Impact on Liquidity Under Current Market Conditions

Sammanfattning: This study examines whether stock splits still improve liquidity under current market conditions. To do so, we conduct three t-tests to examine changes in the bid-ask spread, turnover in relation to market capitalization, and Amivest Liquidity Ratio, around 64 share splits on Nasdaq Stockholm between 2013 and 2022, both for individual firms and on a general level. The study finds no support for improved liquidity in the long term after a split under current market conditions, in contrast to much of the previous literature performed on larger, historical data sets. The overrepresentation of higher split ratios in the most improved firms however suggests that there still exists an optimal trading range where liquidity is maximized, but that the required frequency of splits to stay within the range may be significantly smaller under current market conditions.