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. Hence, India`s stock market is said to be efficient. The results show that there is no significant difference between Average Abnormal Returns before the announcement and after the announcement of stock splits. The study is based on 27 stock split announcements of Indian IT industry. The reference period for the study ranges from 2005-2016. This paper is an attempt to investigate such type of announcement effect with the help of Event Study methodology. Under the above mentioned aim of stock split, there arise a need to examine impact of this action on stock prices. According to EMH, any event which does not contain any information should not affect price and returns on the announcement date.
A company split its shares usually when it is priced above the trading range.
Even though the market capitalization does not change due to mere splitting up of shares, greater liquidity and higher demand on the share will drive the share price up, thereby increasing the company's market capitalization and value. Many investors do not like to buy high priced stock, but will consider a stock after a split when the share price is lower. Generally, the stock split strategy is aimed to make scrip more liquid and affordable to the average investor because with this corporate action the face value of the shares will reduce and number of shares would increase.
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