A Study on Stock Price Reaction of Bonus Share Announcement

A study on stock price reaction of bonus share announcement. Asian Journal of Research in Business Economics and Management (2013), 3(5), 271-288.

27 Pages Posted: 7 Jun 2019

See all articles by Dr. Divyang Joshi

Dr. Divyang Joshi

Parul Institute of Management and Research, Parul University

Date Written: May 15, 2013

Abstract

Over the years, the corporate event announcement and its impact on stock price movement are one of the interesting and debatable issues among research scholars, analysts, fund managers and policy makers. The main objective of the study was to understand the impact of bonus share announcement. According to theory, there should not be any significant price movement on bonus share announcement because there is no effect on stockholder’s proportional ownership of stocks. But some of the literatures conclude that the earning announcement, bonus announcement and other events generate significant price impact. Total 44 bonus announcement made during the period of 1st January, 2011 to 31st December, 2011. From the 44 companies 33 companies fulfill all requirements for the study. The historical prices for the said period were collected from the BSE and NSE’s websites. The study found that Indian market is in semistrong form in long duration. But in short duration, investor can generate above average profit. The ASRV was found 1 for 31 days; it means Bonus share announcement information was perfectly absorbed within 31 days. There is negative correlation between the abnormal return of pre-announcement return and post-announcement return. The pre event period of -15 days positive return for the investors and after event it generate negative return. On the event day stocks does not generate abnormal return compare to market return.

Keywords: ASRV, CAR, CAAR, T Test and Z Test

JEL Classification: G12

Suggested Citation

Joshi, Dr. Divyang, A Study on Stock Price Reaction of Bonus Share Announcement (May 15, 2013). A study on stock price reaction of bonus share announcement. Asian Journal of Research in Business Economics and Management (2013), 3(5), 271-288.. Available at SSRN: https://ssrn.com/abstract=3392278

Dr. Divyang Joshi (Contact Author)

Parul Institute of Management and Research, Parul University ( email )

14 C SHIVAM TENEMENTS
OPP GOVARDHAN TWONSHIP GATE 2
BARODA, 390019
India

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