Markku Kaustia's and Ville Rantala's paper accepted to Journal of Financial Economics
We find that firms are more likely to split their stock if their peer firms have recently done so. The effect is comparable to an increase of 40-50% in the share price. Splitting probability is also increasing in the announcement returns of peer splits. These results are consistent with social learning from peers’ actions and outcomes. The unique features of the setting and various further tests render alternative explanations unlikely. We find no clear benefit in following successful peer splitters. Firms are sometimes suspected to succumb to imitation, and the effect we document may be a case in point.
The paper can be downloaded at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2023865