Average daily cumulative abnormal volume turnover (ACAVT) is an interesting indicator for research purposes to determine the existence of possibly insider trading. The objective of this paper is to examine the existence of the possibly insider trading prior stock split announcement by using ACAVT. A sample of 79 public listed companies in Bursa Malaysia which did stock split within the period of 2013 to 2017 is analyzed. This paper also studies sample with positive ACAVT to determine the relationship between insider trading and independent variables which are market capitalization and major shareholder. One Sample T-Test and Multiple Regression Analysis are used in the study. The results indicate that there is 36.71% or 29 of studies sample involved in suspicious of insider trading. However, the negative value of ACAVT’s mean indicates that there is no existence of possibly insider trading prior stock split announcement. Market capitalization and major shareholder are insignificant negatively associated with possibly insider trading.
1. Ascioglu, N. A., McInish, T. H., & Wood, R. A. (2002). Merger announcements and trading. Journal of Financial Research, 25(2), 263-278.
2. Aktas, N., De Bodt, E., & Van Oppens, H. (2008). Legal insider trading and market efficiency. Journal of Banking & Finance, 32(7), 1379-1392.
3. Angel, J. J. (1997). Tick size, share prices, and stock splits. The Journal of Finance, 52(2), 655-681.
4. Augustin, P., Brenner, M., & Subrahmanyam, M. G. (2015). Informed options trading prior to M&A announcements: Insider trading?.
5. Baer, M. H. (2017). Insider Trading's Legality Problem. Yale LJF, 127, 129.
6. Barron, O. E., Schneible, R. A., & Stevens, D. E. (2017). The changing behavior of trading volume reactions to earnings announcements: Evidence of the increasing use of earnings news by investors. Contemporary Accounting Research
7. Beladi, H., Chao, C. C., & Hu, M. (2016). Another January effect—Evidence from stock split announcements. International Review of Financial Analysis, 44, 123-138.
8. Bender, R., & Ward, K. (2005). Corporate Financial Strategy (3rd ed.). Hungary: Elsevier Butterworth-Heinemann.
9. Bhattacharya, U., & Daouk, H. (2002). The world price of insider trading. The Journal of Finance, 57(1), 75-108.
10. Boyle, J. (1992). A theory of law and information: Copyright, spleens, blackmail, and insider trading. California Law Review, 1413-1540.
11. Campbell, C. J., & Wasley, C. E. (1996). Measuring abnormal daily trading volume for samples of NYSE/ASE and NASDAQ securities using parametric and nonparametric test statistics Review of Quantitative Finance and Accounting, 6(3), 309-326.
12. Chau, M., & Vayanos, D. (2006). Strong-form efficiency with monopolistic insider. The Review of Financial Studies, 21(5), 2275-2306.
13. Chae, J. (2005). Trading volume, information asymmetry, and timing information. The Journal of Finance, 60(1), 413-442.
14. Chen, H., Nguyen, H. H., & Singal, V. (2011). The information content of stock splits. Journal of Banking & Finance, 35(9), 2454-2467.
15. Chen, Q., Goldstein, I., & Jiang, W. (2006). Price informativeness and investment sensitivity to stock price. The Review of Financial Studies, 20(3), 619-650.
16. Chern, K. Y., Tandon, K., Yu, S., & Webb, G. (2008). The information content of stock split announcements: Do options matter?. Journal of Banking & Finance, 32(6), 930-946.
17. Copeland, T. E. (1979). Liquidity changes following stock splits. The Journal of Finance, 34(1), 115-141.
18. Demski, J. S., & Feltham, G. A. (1978). Economic incentives in budgetary control systems. Accounting Review, 336-359.
19. Dennis, P. (2003). Stock splits and liquidity: the case of the Nasdaq-100 index tracking stock. Financial Review, 38(3), 415-433.
20. Desai, H., & Jain, P. C. (1997). Long run common stock returns following stock splits and reverse splits. The Journal of Business, 70(3), 409-433.
21. Doffou, A. (2003). Insider trading: a review of theory and empirical work.
22. Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management, 14(1), 57-74.
23. Fama, E. F. (1980). Agency Problems and the Theory of the Firm. Journal of Political Economy, 88(2), 288-307.
24. Fishman, M. J., & Hagerty, K. M. (1992). Insider trading and the efficiency of stock prices. The RAND Journal of Economics, 106-122.
25. Grinblatt, M. S., Masulis, R. W., & Titman, S. (1984). The valuation effects of stock splits and stock dividends. Journal of Financial Economics, 13(4), 461-490.
26. Ikenberry, D. L., Rankine, G., & Stice, E. K. (1996). What do stock splits really signal? Journal of Financial and Quantitative Analysis, 31(3), 357-375.
27. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
28. John, K., & Lang, L. H. (1991). Insider trading around dividend announcements: Theory and evidence. The Journal of Finance, 46(4), 1361-1389.
29. Karpoff, J. M.
To cite this article: Jakpar, S. Tinggi, M., Yu, T. Z. Samsudin, N. (2020). Stock Split in Insider Trading: Lessons from Malaysia., International Journal of Academic Research in Accounting, Finance and Management Sciences 10 (2):184-194.
Copyright: © 2020 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
