Analysis of Market Reaction Around the Bonus Issues in Indian Market

Abstract

When the companies accumulated huge profits and reserves, and it desires to capitalize these profits the companies will go for issuing bonus shares. The present study is an attempt to study the stock price reaction to bonus share announcements and ex-bonus date of listed Indian companies during the period 2015. Fifty seven companies which have come up with the bonus issue were considered for this study. Event study methodology was adopted in order to understand the volatility of stock returns. The abnormal returns and cumulative abnormal returns was calculated to understand the effect of these events on the share price. It was found that the stock prices do not react to bonus share announcements and ex- bonus dates.

Keywords: Bonus Share, Event Study, Stock Volatility