An Empirical Analysis of Stock Market Reaction Around Bonus Issue Announcement in the Colombo Stock Exchange: An Empirical Study Based on the Period of 2003–2007

Posted: 23 Sep 2011  

Pratheep Francis Xavier II

SAMPATH BANK PLC

Date Written: September 23, 2011

Abstract

This study examines the stock price reaction to the information content of bonus issue with the view of the Srilankan Stock Exchange is semi-strong efficient or not. The period of the study is January 2003 to April 2007. Sample of 67 bonus issues made by both financial and non-financial sector companies have been used to study the announcement effect. Standard event study methodology of Brown and Warner (1985) is employed to find the results. The results indicate that there are significant negative abnormal returns for the pre-announcement period. On the announcement day the AAR is -0.82% is observed. There is no significant difference observed in the financial and non-financial sectors. The results provide stronger evidence of semi-strong market efficiency of the Colombo Stock Exchange.

Keywords: price reaction, standard event study, abnormal returns, bonus issue announcement

JEL Classification: M52, G24

Suggested Citation

Xavier, Pratheep Francis, An Empirical Analysis of Stock Market Reaction Around Bonus Issue Announcement in the Colombo Stock Exchange: An Empirical Study Based on the Period of 2003–2007 (September 23, 2011). Available at SSRN: https://ssrn.com/abstract=1932619

Pratheep Francis Xavier II (Contact Author)

SAMPATH BANK PLC ( email )

NO 160, SIR JAMES PEIRIES MAWATHA
COLOMBO-2
COLOMBO, CO SOUTHERN 40000
Sri Lanka
0112303050 (Phone)

HOME PAGE: http://WWW.SAMPATH.LK

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