If a firm declares a 20:1 stock split, and the pre-split price was $500, then we might expect the post-split price to be $25. However, it often turns out that the post-split price will be higher than $25. This higher price could be due to t signaling effects - investors believe that management split the stock because they think the firm is going to do better in the future. The higher price could also be because investors like lower-priced shares. 

True or False?

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True The stock price after the split will be higher than 25 because the demand f... View the full answer