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An Empirical Analysis of Market Reaction Around the Bonus Issues in India

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  • Asim Mishra

    (Indian Institute of Management)

Abstract

Past researches have revealed significant abnormal returns for bonus issues even though the bonus issue date is known in advance and the distribution contains no new information. This study examines the stock price reaction to the information content of bonus issues with a view of examining the Indian stock market is semi-strong efficient or not. The period of the study is June 1998 to August 2004. Samples of 46 bonus issues have been used to study the announcement effect by using event study methodology. The results indicate that there are significant positive abnormal returns for a five-day period prior to bonus announcement in line with evidence from developed stock market. On the announcement day the average abnormal return of -0.10% is observed. The results provide stronger evidence of semi-strong market efficiency of the Indian stock market.

Suggested Citation

  • Asim Mishra, 2005. "An Empirical Analysis of Market Reaction Around the Bonus Issues in India," Finance 0507003, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0507003
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    Cited by:

    1. Karamjeet Kaur & Balwinder Singh, 2009. "Stock Price Reaction to Bonus Share Announcements in India," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 34(2), pages 202-226, May.
    2. Abhay Kumar & Rashmi Soni & Iqbal Thonse Hawaldar & Meghna Vyas & Vaibhav Yadav, 2020. "The Testing of Efficient Market Hypotheses: A Study of Indian Pharmaceutical Industry," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 208-216.
    3. Animesh Bhattacharjee & Madhu Kumari & Joy Das, 2020. "Investigating the Impact of the Announcement of Loan Moratorium on Stock Prices: Evidence from Indian Public Sector Banks," Jindal Journal of Business Research, , vol. 9(2), pages 106-116, December.
    4. Nagendra Marisetty & Pardhasaradhi Madasu, 2023. "Corporate Announcements and Market Efficiency: A Case on Indian Capital Market," International Journal of Business and Management, Canadian Center of Science and Education, vol. 16(8), pages 1-71, February.
    5. Sai Saran C, 2018. "Effect of Declaration of GST Rates and Changes in the GST Rates on the Sectorial Indices of National Stock Market," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 9(2), pages 51-58, May.

    More about this item

    Keywords

    Bonus Issues; India; stock market; abnormal returns; semi strong efficient; event study; cumulative abnormal return; Cowan Test; Standardized abnormal return;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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