In this paper, we first examine whether the decision to split before acquisition announcement is a common behavior among firms, or just a coincidence in some isolated cases. If a general pattern indeed exists, we will attempt to further investigate whether this behavior is motivated by acquirers’ intentions to manipulate stock prices before acquisition announcements to lower the costs of acquisitions. During our sample period (from 1980 to 2003), we find that acquiring firms are more likely than nonacquiring firms to split their common stocks before acquisition announcements. For example, in the six-month period before making an acquisition announcement, the probability of a stock split for an acquiring.
