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If a firm declares a 5:1 stock split, and the pre-split price was $500, then we might expect the post-split price to be $100. However,

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If a firm declares a 5:1 stock split, and the pre-split price was $500, then we might expect the post-split price to be $100. However, it often turns out that the post-split price will be higher than $100. This higher price could be due to 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 False

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