Market Reaction to Stock Split

7304 Words May 21st, 2013 30 Pages
MARKET REACTION AROUND BONUS ISSUES AND STOCK SPLIT IN PHARMACEUTICAL INDUSTRY

Submitted By:
NIMISHA.M.BABU
1020251

Under the Guidance of:
PROF. ANIRBAN GHATAK

CHRIST UNIVERSITY INSTITUTE OF MANAGEMENT
BANGALORE

CHAPTER- 1
INTRODUCTION

1.1BACKGROUND OF THE STUDY
BONUS ISSUE

Bonus issues are simply distribution of additional stocks to the existing shareholders. It is a “free” issue of shares, without a subscription price, made to existing shareholders in proportion to their current investment. A firm can distribute bonus shares by using retained earnings or accumulated capital reserves. The relationship between Bonus issues and share prices has been the subject of much empirical discussion within the finance
…show more content…
The current study is to identify whether the announcement of bonus issue and stock split has any impact on the stock price.
1.3OBJECTIVES OF STUDY
The various objectives are * To analyze the impact of announcement of stock split and bonus shares. * To investigate whether this would lead to superior profitability. * To see whether there is any abnormal returns after the announcement of bonus issue and stock split * To find out the most important determinants of buying decision making of companies announcing bonus shares

1.4RESEARCH METHOD
The research methods would be event study and signaling hypothesis. This can be done with the help of tools like T-tests and graphs.

1.5EXPECTED CONTRIBUTION AND SIGNIFICANCE OF THE RESEARCH
The research contributed towards the factors that lead to abnormal returns on announcement of bonus issue and stock splits. The research helps us to analyze the market reaction on announcement of stock splits.
1.6STRUCTURE OF THE THESIS
Empirical studies in India and abroad have proved that there is significant abnormal return around bonus issue announcement. These have been mainly proved using event study and the signaling hypothesis. The study would provide an insight into the problem of whether there is any change in the stock price on issue of the bonus shares and stock split. This would be done by building a model by using tools like
Open Document