This paper contributes to the literature in several ways. Our study is the first to document that firms are more likely to split their stocks before acquisition announcements and the first to attempt to explain why they might do so. This paper also contributes to the literature on managerial opportunistic behaviors. Prior studies identify possible manipulation tools such as earnings management (Erickson and Wang, 1999; Louis, 2004) and share repurchase (Chan, Ikenberry, Lee, and Wang, 2005). Our study shows that some firms appear to use stock splits to manipulate their stock prices, especially when incentives exist for them to do so. 3 This finding offers new insight into managerial.
