Further Evidence of the Effect of Stock Splits on the Securities Market, Does a “Wal-Mart Effect” Exist?

Abstract

Recent research has investigated whether or not there is a distinct “Wal-Mart Effect” in the securities market. That is, does Wal-Mart possess an advantage over its competitors in analyzing security prices? A factor associated with this notion centers around the numerous stock splits by Wal-Mart during its corporate life. This study compares Wal-Mart to all other firms in the retail trade industry that have had multiple stock splits. Results of this study show that Wal-Mart still maintains an advantage over its competitors with respect to information content of a wealth measure. When comparing firms with multiple stock splits to all other firms in the same industry, firms with multiple stock splits have a similar advantage. These findings establish a basis for concluding that, on whole, firms that have multiple stock splits over their corporate life are more likely to possess more significant information content of wealth when linked to security prices than firms with fewer or no multiple stock splits.