Market Reaction Around the Stock Splits and Bonus Issues: Some Indian Evidence

24 Pages Posted: 25 Jan 2008

See all articles by Satyajit Dhar

Satyajit Dhar

University of Kalyani

Sweta Chhaochharia

Institute of Chartered Financial Analysts of India (ICFAI)

Date Written: January 24, 2008

Abstract

It is often argued that stock splits and bonus issues are purely cosmetic events. However, many studies have found numerous stock market effects associated with bonus issues and stock splits. This paper examines the effects of these two types of events for the Indian stock market. We use the event study methodologies. The abnormal returns are calculated using the Capital Asset Pricing Model and then t-tests are conducted to test the significance. Consistent with the existence literatures, the two events are associated with significantly positive announcement effect. For bonus issues, the abnormal returns were about 1.8% and for stock splits, it was about 0.8%. On a whole, the paper finds evidence of semi-strong form efficiency in the Indian stock market.

Keywords: Stock split, Bonus Issue, Capital Market Efficiency, Efficienct Market Hypothesis, Event Study, Capital Asset Pricing Model, t-Test, Abnormal Return, Semi Strong Market Effciency

Suggested Citation

Dhar, Satyajit and Chhaochharia, Sweta, Market Reaction Around the Stock Splits and Bonus Issues: Some Indian Evidence (January 24, 2008). Available at SSRN: https://ssrn.com/abstract=1087200 or http://dx.doi.org/10.2139/ssrn.1087200

Satyajit Dhar (Contact Author)

University of Kalyani ( email )

Block C, University Of Kalyani
Kalyani
West Bengal, 741235
India

Sweta Chhaochharia

Institute of Chartered Financial Analysts of India (ICFAI) ( email )

Sector V, Salt Lake, Kolkata,
JF2/1 Aswini Nagar, Aswini Batika, Kolkata 159
Kolkata, IN West Bengal 7000159
India

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