Does Bonus Issue Signal Superior Profitability? A Study of the Bse Listed Firms
34 Pages Posted: 6 Aug 2003
Date Written: December 2002
This paper investigates the operating performance behavior around bonus distribution for a large sample of firms listed on Bombay Stock Exchange (BSE) to examine the relevance of signaling hypothesis in India. Previous work in this area with Indian data sets has focused on share price behavior around bonus issue. Consistent with the signaling hypotheses, bonus issuers exhibit superior operating performance relative to control firms with similar pre-event performance. The operating performance of firms issuing bonus shares is superior to their industry peers both prior to and subsequent to the bonus issue. We link the impact of corporate control mechanism on signaling by documenting the relationship between ownership-structure and post bonus issue operating performance. Further, we examine announcement return and its relation with firm specific variables.
Keywords: Stock Dividend, Bonus Issue, Signaling, Operating Performance, Event Study and Ownership Structure, Indian Capital Market
JEL Classification: G32, G35
Suggested Citation: Suggested Citation