Shareholders Wealth Effects of Rights and Bonus Issues: Evidence from Sri Lanka

International Journal of Accounting and Business Finance, 1(2), 1-13, 2015

13 Pages Posted: 19 Feb 2016

Date Written: 2015

Abstract

This paper investigates price reaction to announcements of rights and bonus issues by firms listed on Colombo Stock Exchange (CSE) during the period 2008-2013. We document that the market reacts negatively to the announcements of rights offerings while bonus issues convey positive signal to the market. The cross-sectional analysis shows that the market reacts more unfavorably to rights issues with lower issue size, higher risk, lower pre-issuance stock run-up, lesser concentrated ownership, lower profitability, and smaller firms. Our empirical result also provides that investors react more favorably to the announcements of bonus issues with higher pre-issuance stock run-up and smaller firm sizes.

Keywords: Rights offers, bonus issues, price reaction, frontier market, Sri Lanka

Suggested Citation

Velayutham, Eswaran, Shareholders Wealth Effects of Rights and Bonus Issues: Evidence from Sri Lanka (2015). International Journal of Accounting and Business Finance, 1(2), 1-13, 2015 , Available at SSRN: https://ssrn.com/abstract=2733950

Eswaran Velayutham (Contact Author)

University of Southern Queensland ( email )

P.O.Box 238 Darling Heights
Toowoomba, Queensland 4350
Australia

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