MERI-Journal of Management & IT

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

An Event Study on Abnormal Returns in Banking Sectors


Affiliations
1 Haryana School of Business, GJUS&T, Hisar, India
2 Rukmini Devi Institute of Advanced Studies, GGSIPU, India
     

   Subscribe/Renew Journal


The study aims to find the impact of Government announcement of infusing 2.11 lakh crores to hit NPA in the banks on share prices of the banks with high gross NPAs of their advances. Event study methodology given by Elton and Gruber, 2002 using daily returns and Ordinary Least Square (OLS) market model (Brown and Warner, 1985) is used in the study to find the pattern of share price movement with respect to the announcement. The event taken in the study is Government announcement of infusing 2.11 lakh crores to hit NPA in the banks made on 24th October, 2017. Parametric t test has been used to test the significance of the abnormal returns during the event window. The results indicated that the announcement has a positive and significant impact on the stock prices. There was a possibility to make abnormal gains. The cumulative abnormal returns of 5.7 per cent were generated in the event window.

Research Limitations- The study is done using five banks each from public and private sectors. The study with respect to only public sector bank or only private sector bank might provide different set of results.


Keywords

Event Study, NPA, Semi Strong Form, OLS Market Model, Efficient Market Hypothesis, T Test.
User
Subscription Login to verify subscription
Notifications
Font Size

  • Ali S. S., Mustafa, K., & Zaman, A. (2002). Testing Semi Strong Form Efficiency of Stock Market. The Pakistan Development Review, 40(4), 651-674.

  • Balasubramanian, P. (1996). The Stock Market in India: A Test of informationally Efficient Market Hypothesis, Doctoral Dissertation, Jawaharlal Nehru University, New Delhi.

  • Bharath, M. (2012). Market Efficiency of Indian Stock Market – A Study with reference to Bombay Stock Exchange, Doctoral Dissertation, Annamalai University, Tamil Nadu.

  • Biktimirov, E. N., & Durrani, F. (2017). Market reactions to corporate name changes : evidences from Toronto Stock Exchange. International Journal of Managerial Finance, 13(1), 50-69.

  • Campbell, K., & Ohuocha, C. (2011). The stock market reaction to stock dividends in Nigeria and their information content. Managerial Finance, 37(3), 295-311.

  • Cooper, D. R., & Schindler, P. S. (2006). Business Research Methods. Tata Mc Graw Hill.

  • Das, S., Pattanayak, J. K., & Pathak, P. (2014). Effect of quarterly earnings announcement under different market conditions An empirical study of companies constituting SENSEX. Journal of Indian Business Research, 6 (2), 128-154.

  • Dsouza, J.J., & Mallikarjunappa, T. (2014). Quarterly Earnings and Stock Prices Reactions – A Study of BSE-500 Companies. Amity Journal of Finance, 1(1), 9-35.

  • Elton, E. J., & Gruber, M. J. (2002). Modern Portfolio Theory and Investment Analysis. Wiley.

  • Fama, E.F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, 25(2), 28- 30.

  • Fama, E. F., Fisher, L., Jensen, M. C., & Roll, R. (1969). The Adjustment of Stock Prices to New Information. International Economic Review, 10(1), 1-21.

  • Gupta, H. (2015). A Study on Impact of Union Budget on Stock Market (NIFTY). Journal of Advanced Research in Accounting and Finance Management, 1(2), 1-6.

  • Gujarati, D. N., Porter, D. C., & Gunasekar, S. (2016). Basic Econometrics. Mc Graw Hill.

  • Howe, J. S. (1986). Evidence on Stock Market Overreaction. Financial Analysts Journal, 42 (4), 74-77.

  • Huang, X. (2004). China Stock Price Reactions to Financial Announcements: Evidence from Segmented Markets. Managerial Finance, 30, 62-73.

  • Jiang, L. (2011). Order Imbalance, Liquidity, and Market Efficiency: Evidence from the Chinese Stock Market. Managerial and Decision Economics, 32(7), 469-480.

  • Kumar, S. (2014). Testing of Efficient Market Hypothesis in its Semi Strong Form in Indian Context, Doctoral Dissertation, Anna University, Chennai.

  • Lahiri, M., (2012). Predictability of Share Prices In India During Post-Reform Period: A Test of Semi-Strong Form of Market Efficiency. Doctoral Dissertation, The University of Burdwan, West Bengal.

  • Manickaraj, M. (2004). Information Content of Quarterly Earnings and Efficiency of Indian Capital Markets: An Empirical Study, Doctoral Dissertation, Periyar E.V. R. College, Tiruchirapalli.

  • Nadig, A. (2014). An Empirical Study of Semi Strong Form of Market Efficiency of Select Sectors of Bombay Stock Exchange, Doctoral Dissertation, Manipal Uniersity, Banglore.

  • Niarchos, N. A. (1986). The Effect of Annual Corporate Profit Reports on the Athens Stock Exchange: An Empirical Investigation. Management International Review, 26(1), 64-72.

  • Olowe, A. R. (1998). Stock Splits and The Efficiency of The Nigerian Stock Market. African Review of Money Finance and Banking, 1(2), 97- 126.

  • Patten, D. M. (2008). Does the Market Value Corporate Philanthropy? Evidence from the Response to the 2004 Tsunami Relief Effort. Journal of Business Ethics , 81(3), 599-607.

  • Raja, M. (2008). “Testing the efficiency of Indian Stock Market with respect to Information Content of Corporate Event Announcements - A Study on Information Technology Companies”, Doctoral Dissertation, Bharathidasan University, Tiruchirapalli.

  • Ramachandran, R. (2012). “Effect of Corporate Information Release and its Context on Price and Volume of Shares”, Doctoral Dissertation, C.M.S. College, Kottayam.

  • Reilly, F. K., & Brown, K. C. (2012). Analysis of Investments and Management of Portfolios. Cengage Learning.

  • Thomas, S., & Shah, A. (2002). Stock Market Response to Union Budget. Economic and Political Weekly,37(5), 455-458,

  • Woolridge, J. R., & Snow, C. C. (1990). Stock Market Reaction to Strategic Investment Decisions. Strategic Management Journal, 11(5), 353-363.

  • http://www.firstpost.com/business/bad-loans-of-indian-banks-cross-rs-800000-cr-banking-mess-explained-in-7-charts-3939999.html


Abstract Views: 520

PDF Views: 5




  • An Event Study on Abnormal Returns in Banking Sectors

Abstract Views: 520  |  PDF Views: 5

Authors

Pardeep Gupta
Haryana School of Business, GJUS&T, Hisar, India
Anil Kumar Goyal
Rukmini Devi Institute of Advanced Studies, GGSIPU, India
Supriya Sardana
Haryana School of Business, GJUS&T, Hisar, India

Abstract


The study aims to find the impact of Government announcement of infusing 2.11 lakh crores to hit NPA in the banks on share prices of the banks with high gross NPAs of their advances. Event study methodology given by Elton and Gruber, 2002 using daily returns and Ordinary Least Square (OLS) market model (Brown and Warner, 1985) is used in the study to find the pattern of share price movement with respect to the announcement. The event taken in the study is Government announcement of infusing 2.11 lakh crores to hit NPA in the banks made on 24th October, 2017. Parametric t test has been used to test the significance of the abnormal returns during the event window. The results indicated that the announcement has a positive and significant impact on the stock prices. There was a possibility to make abnormal gains. The cumulative abnormal returns of 5.7 per cent were generated in the event window.

Research Limitations- The study is done using five banks each from public and private sectors. The study with respect to only public sector bank or only private sector bank might provide different set of results.


Keywords


Event Study, NPA, Semi Strong Form, OLS Market Model, Efficient Market Hypothesis, T Test.

References





DOI: https://doi.org/10.25089/%2FMERI%2F2018%2Fv11%2Fi2%2F173962