Gopaljee and Amul Milk Products

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Market reaction around the Announcement of Stock Split and Bonus Issues in India: An Empirical Analysis

Dr. Vibha Dua Satija, vibha.dua.satija@gmail.com, Reader, Delhi Institute of Advanced Studies, Affiliated to G.G.S.I.P University, Delhi
Dr. Harsh Purohit , iic@banasthali.in, Associate Professor & Chair- ICICI Bank CBFSI , WISDOM, Faculty of Management Studies, Banasthali University, Banasthali Vidyapith
Haritika Sabharwal Chhatwal , haritika@rediffmail.com, Senior Lecturer , Delhi Institute of Advanced Studies, Affiliated to G.G.S.I.P University, Delhi

Abstract
Volatility and uncertainty persists in the financial markets across the world. In this environment, each small and big event affects the markets. Therefore, it
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This is because the dividend rate (% of face value) is not expected to change after bonus issue. When the company makes bonus issue, the shareholders perceive that management is confident of future. A study done by Gupta (1973) finds out that as many as one third of the companies issuing bonus shares did not increase the total dividend payment.
According to Ross (1977), Leyland and Pyle (1977) managers use financial decision of stock dividend to convey favorable private information about the current value of the firm. Klien and Peterson (1989), Grinblatt, Masulis, Titman(1984)Brenan and Copeland (1988) Asquith(1989) Lakonishok and Lev(1987) provide further support for this. Abhijit Dutta (2001) has examined the investor reaction to information using the primary data collected from 600 individuals and observes that the individual investors are less reactive to bad news as they invest for longer period. Hari Om Chaturvedi (2000) in his doctoral thesis observed that the cumulative abnormal returns (CAAR) between the portfolios with positive and negative unexpected half yearly earnings were significant.
A few studies have been carried out in recent years to test the announcement effects of bonus issue in Indian stock market. Ramachandran (1988) found out mixed evidence for semi strong form of efficiency in Indian stock market. M. Obaidullah (1992) and Rao (1994) found positive stock market reaction to equity

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