Drishtikon: A Management Journal

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Impact of Stock Splits and Rights Issue Announcements on Market Price: Evidence from India


Affiliations
1 Department of Business Administration, St. Joseph Engineering College, Vamanjoor, Mangaluru, Karnataka, India
     

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The current paper studies the impact of two events i.e stock splits and rights issue announcement on the stock returns of companies listed on the Bombay Stock Exchange. The study consists of a sample of 90 announcements for stock splits and 29 announcements for rights issue during the period 2011-2014. Market model is used to calculate the abnormal returns of securities. Positive Average Abnormal Returns were observed for the two events on the day their announcements, however they are not statistically significant. The study concludes that the Indian stock market is efficient in its semi-strong form.

Keywords

Semi-Strong, Stock Splits, Rights Issue, Market Model, Abnormal Returns.
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  • Impact of Stock Splits and Rights Issue Announcements on Market Price: Evidence from India

Abstract Views: 281  |  PDF Views: 2

Authors

Babitha Rohit
Department of Business Administration, St. Joseph Engineering College, Vamanjoor, Mangaluru, Karnataka, India
Prakash Pinto
Department of Business Administration, St. Joseph Engineering College, Vamanjoor, Mangaluru, Karnataka, India
B. Shakila
Department of Business Administration, St. Joseph Engineering College, Vamanjoor, Mangaluru, Karnataka, India

Abstract


The current paper studies the impact of two events i.e stock splits and rights issue announcement on the stock returns of companies listed on the Bombay Stock Exchange. The study consists of a sample of 90 announcements for stock splits and 29 announcements for rights issue during the period 2011-2014. Market model is used to calculate the abnormal returns of securities. Positive Average Abnormal Returns were observed for the two events on the day their announcements, however they are not statistically significant. The study concludes that the Indian stock market is efficient in its semi-strong form.

Keywords


Semi-Strong, Stock Splits, Rights Issue, Market Model, Abnormal Returns.