Does Bonus Issue Signal Superior Profitability? A Study of the Bse Listed Firms

34 Pages Posted: 6 Aug 2003

See all articles by Jijo Lukose

Jijo Lukose

Indian Institute of Management Kozhikode

Narayan Rao Sapar

Indian Institute of Technology (IIT), Bombay - Shailesh J. Mehta School of Management (SJM)

Date Written: December 2002

Abstract

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

Lukose P. J., Jijo and Sapar, Narayan Rao, Does Bonus Issue Signal Superior Profitability? A Study of the Bse Listed Firms (December 2002). Available at SSRN: https://ssrn.com/abstract=428122 or http://dx.doi.org/10.2139/ssrn.428122

Jijo Lukose P. J. (Contact Author)

Indian Institute of Management Kozhikode ( email )

IIMK Kozhikode
Kozhikode, Kerala, India,
KOZHIKODE, KY XXXXXX
India
+91-9497208290 (Phone)
+91-44-2827 9208 (Fax)

Narayan Rao Sapar

Indian Institute of Technology (IIT), Bombay - Shailesh J. Mehta School of Management (SJM) ( email )

Powai
Mumbai 400076
India
+91-22-2576 7744 (Phone)
+91-22-2572 2872 (Fax)

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