Market Reaction Around the Stock Splits and Bonus Issues: Some Indian Evidence

Dhar, Satyajit; Chhaochharia, Sweta

doi:10.2139/ssrn.1087200

Cited by 28 publications

(33 citation statements)

References 20 publications

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“…The results of their studies are similar to those reported by FFJR (1969) and support the notion that share prices react to stock dividend announcements (see Woolridge, 1983;Grinblatt et al, 1984;Lamoureux and Poon, 1987;Doran and Nachtmann, 1988;McNichols and Dravid, 1990;Banker, Das and Dater, 1993;Aydogan and Muradoglu, 1998;Olowe, 1998;Anderson, Cahan and Rose, 2001;Elfakhani and Lung, 2003;Balachandran, Faff and Tanner, 2004;Farinha and Basilio, 2006;Leung, Rui and Wang, 2006;Lyroudi and Dasilas, 2006;Bechmann and Raaballe, 2007;and Dhar and Chhaochharia, 2008). [1] Despite this weight of evidence, a non-US study covering the period 1981-94 by Papaionnou, Travlos and Tsangarakis (2000) on the share price reaction to stock dividends in Greece did not find any evidence in support of a share price reaction.…”

Section: Literature Reviewsupporting

confidence: 82%

The stock market reaction to stock dividends in Nigeria and their information content

Campbell

Ohuocha

2011

Managerial Finance

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Purpose -To examine whether stock dividend announcements create value for companies traded on the Nigerian stock market and to ascertain the nature of the information such announcements convey.Design/methodology/approach -A standard event study methodology, employing the market model, is applied to determine the abnormal returns both on and surrounding the stock dividend announcement date. Our sample is broken down based on the timing of announcements and on the frequency with which the announcing companies' shares are traded. We also examine the information content of stock dividends by applying the chi-square technique to test the level of association between earnings, cash dividends and stock dividends.Findings -Our study suggests that companies that choose their own announcement date outside the Nigerian stock exchange announcement window experience positive abnormal returns if their stock is more frequently traded and negative abnormal returns if their stock is less frequently traded. In addition, support is found for both the cash substitution hypothesis and the signalling hypothesis as explanations for the information stock dividends convey to shareholders.Research limitations/implications -The small number of companies in the 'early announcement' group may not permit a definitive view to be established about the stock market reaction to early stock dividend announcements for this group of companies.Practical implications -The findings are of practical relevance to researchers, practitioners and investors interested in companies listed on the Nigerian stock market as they reveal the extent to which the shares reflect fundamental information from corporate announcements.Originality/value -This study adds to the very limited academic research on the stock market reaction to stock dividend announcements in Nigeria.

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Section: Literature Reviewsupporting

confidence: 82%

The stock market reaction to stock dividends in Nigeria and their information content

Campbell

Ohuocha

2011

Managerial Finance

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“…This study also found the evidence that the systematic risk was lower during the split date but returned to previous level after the split. Dhar S and Chhaochharia S (2008) found that 77% of their sample firms had positive mean return in respect of stock split and there was a significant average abnormal return at 0.01% significance level. Their study also supported the signalling hypothesis which was consistent with the findings in the developed stock markets.…”

Section: Literature Reviewmentioning

confidence: 91%

An Empirical Study of Stock Split Announcements of Select BSE Sectors Using Event Study Methodology

Nadig

2015

SDMIMD

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This study examines the stock market reaction to stock splits between 2002 and 2013 of 6 sectors of BSE-Auto, Bankex, Consumer Durables, FMCG, Health Care and IT sectors to find out if the Indian stock market is semistrong efficient or not. The methodology used is event study under the market model. Samples of 14 stock splits are considered spread across 6 sectors. The results indicate that there are significant positive abnormal returns prior to split announcements. On the day of split announcement, 1 sector reacts positively (Health Care-3.3%) and the 5 react negatively (Auto -1%, Bankex -0.9%, CD -0.3%, FMCG -1%, and IT-1%). The results indicate that the null hypothesis, H 0 1, that there is no significant AAR around the stock split announcement dates is accepted.

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“…This hypothesis was investigated by Dhar and Chhaochharia (2008). They also concluded that both of the stock splits and stock dividends have different impacts on stock prices towards the announcement of these two actions.…”

Section: Limitation Of Studymentioning

confidence: 99%

The Impact of Stock Dividends and Stock Splits on Shares’ Prices: Evidence from Egypt

Ansary¹,

El-Azab²

2017

AFR

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This research aims to examine the effect of two types of corporate actions,"Stock Split" and "Stock Dividends", on the shares' prices, liquidity changes, and price volatility; and to investigate the efficiency of the Egyptian stock market in response to the announcement of the corporate actions. The research provides the investors with a scientific tool to predict and explain changes in stock prices in response to announced corporate actions and to improve their investment decision-making process.The objective is to investigate whether the two actions collectively or independently have a positive impact on the prices of the related stocks listed on the Egyptian Stock Exchange (EGX), and assess the similarities and dissimilarities between their individual impacts.We applied the "Event Study" approach to measure the impact of the stock splits and stock dividends announcement on the stock prices through measuring the cumulated average abnormal return (CAAR) resulted from events to assess their impact on the stock performance around the announcement day (for a period of 30 prior and 30 days post announcement) as applied before by Terhi (2011).The analysis concluded that the announcement of both of stock split and stock dividend has a positive impact on stock prices. This positive impact drove the authors to test the efficiency of EGX in respect of the impact of the announcement the corporate actions to the public investors. A correlation analysis is performed to reflect this impact.

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Market Reaction Around the Stock Splits and Bonus Issues: Some Indian Evidence

Cited by 28 publications

References 20 publications

The stock market reaction to stock dividends in Nigeria and their information content

The stock market reaction to stock dividends in Nigeria and their information content

An Empirical Study of Stock Split Announcements of Select BSE Sectors Using Event Study Methodology

The Impact of Stock Dividends and Stock Splits on Shares’ Prices: Evidence from Egypt

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