Insider ownership and signals: evidence from stock split announcement effects

This study examines whether investors regard the level of insider ownership of a firm as useful for evaluating stock split decisions. Results show that the abnormal returns at the announcement of stock splits are positively related to the level of insider ownership. The results prevail even after controlling for other relevant factors. Further analysis indicates the positive relation exists for small firms, but not for large firms. This indicates the market evaluates stock split decisions within the context of both insider ownership and information asymmetry.