The impact of stock splits and reverse stock splits on stock returns in the Indonesian market

This study examines the impact of stock splits and reverse stock splits on stock returns around their effective dates in the Indonesia Stock Exchange during the 2022-2023 period.The research applies an event study method and uses the cumulative abnormal return (CAR) approach to measure the difference between actual and expected returns within a 10-day window before and after the corporate action.The results show that stock splits generally have a positive effect on stock returns.CAR increases significantly before the effective date, suggesting a favorable reaction from investors.In contrast, reverse stock splits have a negative effect, as CAR declines sharply on and after the effective date.These findings indicate that stock splits are viewed as positive signals about a company's future performance, while reverse stock splits are often interpreted as signs of potential financial or operational problems.This study contributes to the literature on financial markets in emerging economies and provides practical implications for managers, investors, and regulators.A better understanding of market reactions to share restructuring can support more informed decisionmaking, especially in dynamic capital markets such as Indonesia.