1. and post-bonus issue announcement date. 39

Denis OliyechAyoma
(2009) conducted a study that reveals that the market overreacts in
anticipation of the bonus announcement but corrects itself after the bonus news
has been released which may not be as promising or profitable as initially
expected. There is also an anomaly regarding the semi-strong form
efficiency status of the NSE and it is possible for investors to profit on
bonus share announcement events of the listed companies as evidenced by the
positive CAAR.



Kamanja Bessie Kawarau(2012)
conducted a study on the effect of bonus issue announcements on listed banks
performance has been investigated by this study from two main angles; to
establish the impact on share price performance for the three months period
prior to and three months period subsequent to the announcement of bonus issue
announcement. From the findings it was established that bonus issue
announcements have had an impact on listed banks share price in Kenya.
The impact was however found to be varied, depending on the time period between
the pre- and post-bonus issue announcement date. 39 From the analysis, it
was evident that there has been a significant negative reaction to such
announcements one month before the bonus issue announcement, signalling the
initial shock, panic and uncertainty that accompanies market rumours about such
announcements all the way to three months after the announcement of bonus
issue, the reaction was found to be positive and significant.
This implied that by this period investors had aligned themselves and accepted
the bonus issue.


Prashant plodder (2013) in his research project found out the impact of
announcement of bonus shares on the share price of a firm. For this purpose a sample of 40
companies was selected which was further categorized into financial companies
(9) and non-financial companies (31) to know the sector wise impact. The period for the study was
taken from January 2008 to December 2012. The event-study was conducted for an event window of
– 20 to 20 days with 0 being the day of bonus share announcement. The Average Abnormal Return
(AAR) and the Cumulative Average Abnormal Returns (CAAR) were found out. At last, a series of Paired
Sample T- Test were conducted to analyse the impact of bonus share announcement
on share prices of the firm.
The difference between the impact on the finance sector and the impact on
non-finance sector was also found out. The results revealed that the firms experience
significant CAARs before and after the issue. There was a significant difference between the share
prices of the firm before and after the bonus share announcement. Also, there was a significant
difference in the impact of bonus share announcement on the finance sector as
compared to the impact on non-finance sector.



4.      A.K. Mishra (2005) conducted a research to
examine 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
The period of the study is June 1998 to August 2004. Sample of 46 bonus issues
were used to study the announcement effect by using the event study methodology.
Event window was taken from +20 to -20, with 0 being the date of announcement
of the issue. It was found that on an average, the stock starts showing
positive abnormal returns nine to eight days before the announcement date which
might be due to leakage of information. In general, the behaviour of AAR’s and CAAR’s
was found to be in accordance with the expectation, thereby lending support
that the Indian Stock Market was semi strong efficient.


Gupta,(2006) published a study that investigated the stock market reaction
associated with earnings announcements in the Indian stock market, and verified
whether these announcements possessed any informational value. 50
companies, comprising the CNX Nifty Index, which made earnings announcements in
March 2004, were selected for the purpose of the study. An event study was
conducted for these companies. The sample was divided into two sub-samples
of `good’ and `bad’ news announcements respectively. In the case of full
sample, the study found an insignificant Average Abnormal Return (AAR) on the
announcement day. In contrast, the AARs for `good’ news sub-sample was
greater than zero on the announcement day. There was also a clear
run-up in prices before the announcement of earnings. The AAR was less
than zero on the announcement day in the case of sub-sample of `bad’ news. It
was observed that the price reaction in the case of `bad’ news was much larger
than in the case of `good’ news. The results 10 for the sub-sample indicate
that the market reacts sharply to a decline in earnings on the announcement day.
Thus, the results of the study indicate that earnings announcements contain
important information which causes stock prices to change.


Ms.Madhuri Malhotra, Dr. M.Thenmozhi
and Dr. G.Arun Kumar (2007) conducted a study on ‘Stock market reaction
and Liquidity changes around Bonus issue announcement: Evidence from India’.
This study examined share price reaction to the announcement of Bonus Issue for
a sample of Indian Companies. Standard event study methodology was used for
the purpose of studying the Bonus issue announcement reaction.
Bonus issue announcement yielded negative abnormal returns around the
announcement date. There was a negative reaction after the bonus issue
announcement conveying that the market under reacts after the announcement


Dr.SatyajitDhar and Ms.SwetaChhaochharia (2008) conducted a study on ‘Market
Reaction around the Stock Splits and Bonus Issues: Some Indian Evidence’.
The study examined the effects of Stock Splits and Bonus Issues for the Indian
stock market. They used the event study methodologies. The abnormal
returns were calculated using the Capital Asset Pricing Model and then t-tests
were conducted to test the significance. Consistent with the
existence literatures, the two events were associated with significantly
positive announcement effect. For bonus issues, the abnormal returns were
about 1.8% and for stock splits, it was about 0.8%. On
a whole, the paper found evidence of semi-strong form efficiency in the Indian
stock market.


Gichema and
Grace W (2004) conducted a study which focused on the effect of bonus share
issues on stock prices of companies quoted at the Nairobi Stock Exchange.
The objectives of this study were to determine whether there were abnormal
returns surrounding the bonus issues announcement and to establish the
direction and magnitude of the stock price adjustment on announcement of bonus
The sample consisted of all the companies quoted at NSE which declared bonus
issues between the periods of interest, I January 2004 to 31 July 2007, and
were drawn from all the segments of the Nairobi stock exchange.
Descriptive statistics i.e. mean and standard deviation and t-tests were
used to analyse data. The findings of this study were that the bonus issues
typically generate positive stock price reactions in the short run but produce
no lasting gains in the market price for stocks in the Nairobi Stock Exchange.


Ramesh, S. and Nimalathasan, B. (2011) conducted a research to find out the impact of bonus
issue announcements on share prices of Colombo Stock Exchange (CSE).
The study examined the stock price reaction to the information content of bonus
issue with the view of the CSE being semi-strong efficient or not.
The period of the study was January 2003 to April 2007. Sixty seven (67)
bonus issues i.e., events were used to study the announcement
effect by using the standard event study methodology. Researchers
performed several interrelated statistical procedures through T- test, during
the data analysis procedures. Operational hypotheses were formulated and
results revealed that 43% of Abnormal Returns (ARs) were positively and 57% of
ARs were negatively on the event day “0” (announcement day)


10.  M Bharat and Dr. H.
Shankar (2012) conducted a study to test the informational efficiency of
the Indian Stock Market in the semi strong form of efficient market hypothesis
with respect to the information content of the event bonus issue announced by
companies listed in BSE 500 during the study period. The AARs and CAARs were
analysed to ascertain whether an opportunity was available to make abnormal
returns during the price adjustment period. The study revealed that
investors were unable to earn abnormal returns in the sample companies.



11.  Papaioannou G.J.,
Travlos,N.G., and Tsangarakis N.V.,
(2000) carried out a study to analyse price reaction to stock dividend
announcement by firms listed on the Athens Stock Exchange found no
statistically significant abnormal returns on and around the announcement date. It
may be described by the fact that the bonus issues are compulsory requirement
imposed upon the firms to satisfy the regulatory requirements.
The results of the study prove that the bonus issue by the corporates have a
significant impact on the price movements of the shares and the market is
reacting according to the size of the bonus issues. It is observed from the
study that the scrips in the Nifty Index having higher bonus ratio witness a
positive impact and perform better than the market Index. But at the same
time if the bonus issue is smaller in size, it fails to attract the investors
and hence delivers a negative impact. The research study has also proved that the
performance of those scrips having lesser bonus ratio is underperforming
compared to the market performance. Hence it is concluded that the Indian Equity
market is also behaving identical to the major Global Equity Markets in
relation to the issue of bonus shares.


12.  Subhendu Kumar Pradhan (2014), proposed
study attempts to assess the impact of bonus announcements on share price.
For this purpose, secondary data has been collected from ten companies listed
in S&PBSE 500 index. Event study has been used to calculate the abnormal
returns and cumulative abnormal returns of the companies. Paired sample
T-test has been employed to compare share prices before and after bonus
announcements. Correlation between share price and S&P BSE 500
index has also been analysed to assess whether the share price has changed due
to change in market index during the estimation period. The study has been
conducted for the seven year period of 1st January 2005 to 31st December 2012
while the estimation window period is taken as 10 days before and after
announcement of bonus issue. Results reveal that companies earn positive
abnormal returns before bonus announcement and negative abnormal returns after
bonus announcement in short period. Further results reveal that share price
changes are irrelevant to market changes.


13.  Muradoglu and Aydogan (2003) have
examined the reaction of share price to announcements of stock dividends and
rights issue. He has found that investors who are attracted by lower relative
prices are not expected to be prompt in timing excess returns persists over
longer event windows and are accompanied by increasing trading volumes.


14.  Foster and Vickrey(1978) were among the
earliest to examine the signalling hypotheses using daily return data and in
their examination of the information content of 82 stock dividend
announcements, they found significant positive abnormal returns around
announcement dates. According to the market efficiency hypotheses, any
market values effect caused by stock dividend must be fully discounted by the
ex-dividend day. Hence, the stock price should adjust on the
ex-dividend day only to the level justified by the stock dividend percentage.
Woolridge (1983) tests this theoretical prediction and finds that the price
adjustment is less than what is consistent with the stock dividend percentage.


15.  Ramachandran (1985) studied the impact
of bonus issue announcements on Indian stock prices. He found a varied evidence
of semi – strong form efficiency in the Indian stock market. Lakonishok
and Lev (1987) investigated the trading volume changes after stock dividend
announcement. They established that trading volume did not increase due to
stock dividend announcements.


16.  Balachandran and Tanner (2001) examined
share price reaction to announcement of bonus share issues of Australian
companies, using daily return for the period from January 1992 to December 2000.
Price reaction to bonus issue announcements from the day of the announcements
to the day after the announcements (day 0 to day 1) is statistically
significant and shows positive average of 2.37% for uncontaminated events
and 2.11%
for contaminated events employing the market model.


17.  Malhothra et al, (2007) examined the
stock market reaction and liquidity changes around the bonus issue announcement
of Chemical companies in India from January 2000 to January 2006.
Contrary to previous results the study showed that bonus announcements made by
Indian Chemical companies were associated with significantly negative abnormal


18.  Shirur (2008) analysed the reasons for
the issue of bonus shares and stock splits in Nifty companies. The study
concluded that the Indian capital market is not inherently a semi strong form
of Efficient Market Hypothesis. The top management has to send signals to
make the market efficient.


19.  Joshipura (2009) studied bonus
announcements from 2002 to 2008 of companies listed on the NSE.
The results showed that while there is sufficient evidence of positive abnormal
return associated just prior to and on the announcement day, there is no
significant return observed on ex-bonus day.


20.  Raja and Sudhahar (2010) investigated
the informational efficiency of capital market with respect to bonus issue
announcement from 2000 to 2007 released by 43 IT companies on the Bombay Stock
Exchange. The AAR on the announcement day was found to be 2.06%,
concluding that the Indian capital market, for the IT sector is efficient but
not perfectly efficient to the announcement of bonus issue.


21.  Madhuri
Malhotra & M Thenmozhi, (2013) It can be inferred that for bonus
issue, investors consider risk of the firm, size of the firm, premarket
condition, and the type of industry, whereas in the case of rights issue the
investors consider size of the firm and the issue size while reacting to
announcements. The findings indicates that the market condition
hypothesis is accepted and firms should attempt to announce bonus issue when
the market is in an upward trend, as it is a significant factor influencing the
investors’ reaction. If an announcement is made in the bullish market,
the reaction is likely to be positive and vice versa. The firms should
consider the issue size while planning to announce a rights issue in the
market, as the size of the issue signals about the quality of the issue and
investors get the signal from such announcements. Thus, the study provides
evidence of stock abnormal returns being significantly influenced by the event
and firm-related, market condition and industry-related factors.



22.  Ray &
Koustubh Kanti, (2011)Examined the announcement effects of bonus
issues and stock splits on the Indian stock market during the period April 1996
to March 2008. An event study is conducted using a 61-day event
The study rejects the hypothesis of no significant average abnormal return
around the event dates for stock splits, but fails to reject the hypothesis in
the case of bonus issues. Thus, it proves that in the Indian market the
investors can make abnormal returns around the stock split announcements only. In
the case of liquidity, hypothesis of no change in liquidity is rejected both in
the case of stock splits and bonus issues. One possible reason may be
quoted here that the affordability level of the Indian investor’s increases due
to the stock split and the number of shareholdings increases both by bonus
issues and stock splits.


23.  Lijleblom,
(1989) Investigated the signalling
hypothesis by considering stock market price responses to bonus issues for the
firms that also concurrently release other information such as past earnings.
His findings indicate that there is a greater positive stock price reaction for
the bonus issue-paying group than for the control group.


24.  Rao, (1994)
Suggested that the Indian equity market responds in an expected direction to
firm announcements and supported the semi-strong form of efficient market in
He projected a cumulative abnormal return of 6.3% around the three days of
bonus issue announcement.


25.  Eades.K,
Hess.P, & Kim.E, (1984) Conducted a study  on ” Interpreting Security Returns During the
Ex-Dividend Period”, it was found that the companies listed on the New York
Stock Exchange has delivered a significantly positive returns during the ex-date
of stock dividends. Results were reported that the ex-day itself has
shown the largest average abnormal returns and it was not confined to the
ex-day but were significant on the day prior to it and also two days after to


26.  Lakonishok.J
& Vermaelen.T, (1986) Has observed a substantial positive
abnormal return for stock split and stock dividends. They considered each of
the five trading days prior to the ex-day, the ex-day itself and two trading
days subsequent to it and found that the largest positive abnormal return is
experienced on the ex-day itself.


27.  McNichols.M
& Dravid.A, (1990) Have examined the relationship between the
size of bonus issue and the degree of abnormal returns around the 2015 M.Muthukamu
and Dr.SRajamohan
34 announcement dates in US market. They found that there is a positive
relationship between the size of bonus issue and the abnormal return.
The larger the size of bonus issue delivers positive returns and smaller in
size of bonus issue delivers negative returns.


28.  Balachandiran.B,
Faff.R, & Jong.L, (2005) studied on the share price reaction to
announcement of bonus share issues of Australian Market found that the price
reaction to bonus share announcements from the day of announcement to the
trading day next to the bonus announcement day is statistically significant and
the positive of average 2.73% for uncontaminated events and 2.11%
for contaminated events


29.  Mohantya.S
& Doocheol.M, (2007) Disentangling the signalling and liquidity
effects of stock splits, Applied Financial Economics, 2007, Sunil Mohantya and
DoocheolMoonb. The study aims at finding the signalling based
versus liquidity based effect and explanation of stock split.
The study makes use of market data for industrial firms and depository
institutions. It uses a sample of 3319 stock splits announced by NASDAQ, ASE
and NYSE from 1981 to 2000. Both the group of institutions react
favourably to the announcement of stock split. It also shows that the
stock split helps the firm in realigning the share prices from higher level to a
medium level for each of industry.


30.  (Sew Eng Hooi, 2015) Investigates the relationship
between the dividend policy and share price volatility in the Malaysian stock
market. For the purpose of this study, a sample of three hundred and nineteen
companies from Kuala Lumpur stock exchange (KLSE) was studied for the period of
11 years from 2003 to 2013. Price volatility was treated as the dependent
variable and dividend yield, dividend payout ratio along with other control
variables like firm size, earnings volatility, long term debt and growth was
considered as the independent variables. The data obtained was analyzed using a
regression model and the findings showed that dividend yield and dividend
payout are negatively related to share price volatility and are statistically
significant. Analysis also showed that there was a negative relationship
between firm size and the share price, whereas positive and statistically
significance relationship between earning volatility and long term debt to
price volatility was found. The findings also revealed that no significant
relationship was developed between the growth and share price volatility in the
Malaysian market.