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
The capital structure of a company changes the risks exposure highlighting the need to determine the impact of debt levels on financial risk (Pearson Learning, 2014). The dividend payout is the ratio of dividends per share to the earnings per share, and both ratios increased for the three years. The increase in the DPS rose at a decreasing rate resulting in slower growth in the dividend payout. The dividend per share is dependent on the total number of dividends paid out in an interim year, and the increase in the DPS was in line with the management’s efforts to reward the investors as the earnings improved. The dividend yield representing the dividend paid out relative to the share price, and the lower divided yield in December 2014 can be attributed to the higher share price hovering over $40, which was more than double the share price in the previous
The Royal Bank of Scotland - just like many other banks and businesses - paid out its managers considerable bonuses for their performances. Managers at RBS started maximising their bonuses by aggressive actions such as take overs and investing in complex financial products. These actions caused the profits of RBS to grow rapidly, which meant high bonuses for the managers. These actions, however, also meant the stability and financial safety of RBS on the long-term got worse and worse. This was not a problem for the managers as they had already earned their bonuses. A different bonus structure probably would have prevented the reckless actions of the RBS managers.
After a profit announcement was made by David Jones Ltd, it is the objective of this report to note whether there was an impact of such information on investor behaviour via the share prices of this company. To ensure that the information found was accurate, the effect of the All Ordinaries was taken into consideration and comparisons were made between David Jones and its two main competitors. After analysing the closing share prices before and after the date of the announcement, it was found that share prices reduced more than that of the general stock market and also more than that of its main competitors. This report concludes that the announcement of accounting information by
The weekly performance of IBM stock presented a contestant growth. One highlight of the falling of stock price in the 6th week in the investment period was when IBM presented the 3rd quarter financial report. The investors weren’t satisfied with the profit report which they expected to be better especially when other IT companies were doing well in the 3rd quarter. One mistake I made was that I didn’t follow closely to the financial report of the company; therefore, I missed the peak of the stock price. From this experience, I learned that financial reports and current news are important indicators of the stock price. By following closely to the current event and analyzing the financial report, investors can maximize the profit and also become more familiar to the market.
Using a sample data comprised 297 NYSE and American Stock Exchange companies for 1977 to 1980-time period, indicating twelve quarterly announcements for each of the company. MacKinlay (1997) utilised 30 companies which comprised into Dow Jones Industrial Index, as a sample to test the impact of quarterly earnings announcements to stock prices. The researcher examined totally 600 quarterly announcements, thus MacKinlay (1997) obtained stock price response separately to bad news, good news and no news cases of earnings per share (EPS) announcements.
In this research paper the authors want to express their thoughts by stating that how to them earnings reporting pertains to the discovery of information that has not been disclosed by either people or other types of sources and focus towards the negative in this study. In my opinion, the title of the paper itself could have had a different title only because throughout the paper it analyzes negative or bad news rather than really paying attention to both perspectives. Also the paper captures the information or news that occurs by using a three day window in which Quarterly Earnings Announcement (QEA) take place and compares it to a period where it does not take place. Furthermore, in this paper there are three hypotheses that arise
WALL STREET JOURNAL ARTICLE AND THE EXECUTIVE SUMMARY ............................................................................ 1 WALL STREET JOURNAL ARTICLE......................................................................................................................................................1 EXECUTIVE SUMMARY ...................................................................................................................................................................2 Major Issues
The criminal justice system has been around for thousands of years. It has not always been as formal and structured as it is today, but has been a constant part of society nonetheless. As nations and societies have changed, so has the criminal justice system present within each nation or society. Customs and laws have affected the punishments and procedures observed in criminal justice systems all over the world as certain punishments or laws set in one society may not apply to another society.
Since the emergence of the so-called irrelevance theorem by Miller and Modigliani (1961), many corporations are puzzled about why some firms pay dividends while others do not. They were the first to study the effect of dividend policy on the market value of firms by assuming that there are no market imperfections. Miller and Modigliani (1961) proposed that divided policy chosen by a firm has no significant relationship in as far as the market valuation of the firm is concerned. They went further to explain that; the shareholders wealth remains unchanged irrespective of how the firm distributes it income because the firms’ value is rather determined by their investment policies and the earning power of its assets. They further stated that the opportunity to earn abnormal returns in the market does not exist, that is, owners are entitled to the normal market returns adjusted for risk.
It can fairly be said that an Investor considering an investment decision (whether to purchase, sell or hold stock) in publicly traded company acts on the basis of extensive information which is available by corporation to him until the last moment of his investing decision and try to determine the fair price of corporate stock. In the light of continuous creation of a particular impression of corporate affairs by the corporation, new information by corporate can vanish the importance of previous available information to investor. In the scenario only one kind of investors can get advantage over others, who is either very close to corporate operation (corporate officers) or can access nonpublic price-sensitive information to corporation
The dividend policy such as the payment of dividend affects the market price of share. If there is a debate in this issue, this theory is commonly accepted. In this report the relationship between dividend and the market price of share is proved in the banking sector of Bangladesh. But it is also revealed that
The research shows that the earnings announcements of firms within an industry can impact the share prices of other firms in the same industry. This effect has been labelled as the ‘information transfer effect’. The ‘information transfer effect’ highlights the belief that share prices react to public information emanating from various sources—including
One hundred and four high school students in India were selected to be the participants of the study. The share of the males is equal to the share of the females for these participants. In other words, there were 52
The dividend policy has grown over the years. This may be so that the company projects itself as a less risky share and thus also gaining investors faith. The investors buy its shares and thus increase its demand. This helps to gives positive signals to the investors signalling that the company is stable and can generate earnings steadily. This hypothesis is gains standing from the dividend hypothesis theory.
At the time of this writing, cooperation between East Asian countries remains despairingly low. North Korea continues to fire off missiles into the Sea of Japan. China has multiple territorial disputes with its neighbors and the South China Sea remains hotly contested. Japan continues to deny the atrocities it committed in World War II, including the gruesome rape of Nanking as well as horrific human rights abuses committed against the Chinese. Trade between India and China, the two largest economies on the continent as measured by PPP, is badly unbalanced and stands at a mere 70 billion dollars worth annually, compared to 650 billion dollars worth of trade annually between China and the United States.