Enhanced Disclosure Environment And Stock Dividend/Split In China

This paper examines changes in firm behaviour around a regulatory change regarding stock dividend/split in China which mandates enhanced disclosure of such activities. Firms announce significantly fewer stock dividends/splits in the enhanced disclosure environment. The enhanced disclosure also improves the link of stock dividend/split activities with firm growth. Investors react less positively to stock dividend/split announcements in the enhanced disclosure environment. The findings suggest that more cautious announcement strategies and more rational investor reactions are consistent with a decline in false signalling.