Analysis of market reaction to bonus issue announcement in Indian stock market Online publication date: Fri, 16-Sep-2022
by Anu Bagri Jajoo; Indra Nirmal
International Journal of Indian Culture and Business Management (IJICBM), Vol. 27, No. 1, 2022
Abstract: Companies capitalise on the accumulated profit by issuing the bonus share to shareholders. The information content of the bonus issue is perceived to be positive. This paper is an attempt to study the market behaviour pertaining to the bonus announcement by making inferences on the variation in price around announcement day. Using the standard event study methodology, the paper investigates the market reaction on bonus of the companies, which are included in the Nifty 200 index, for the period 2000-2019. A total of 171 bonus events announcement was studied for 61 days event window (-30 to +30). The result revealed the existence of a significant difference in abnormal return between pre- and post-event window and concludes that the Indian market exhibits a semi-strong form of efficiency. The pattern of abnormal return observed around announcement day strives as evidence for the findings that bonus issue in Indian capital market is anticipated prior to the announcement and leaves no scope for exploitable inefficiencies.
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