Abstract:Event study analysis is applied to investigate stock price reaction to the announcement of bonus issues for the emerging stock markets of China. Results show that the issues with a high bonus ratio (number of bonus shares in the issue/number of existing shares) usually attract positive returns for both Chinese (A-share traders) and foreign (B-share traders) residents. Issues with a low bonus ratio are rewarded with negative returns for A-share traders and do not stimulate significant activity by B-share trader… Show more
“… See, for example, Grinblatt et al (1984) and Rankine and Stice (1997) for the US evidence. Similar market reactions are also detected in other markets such as Australia, Canada, China, Denmark, Germany, Greece, Hong Kong, India, Japan, Korea and Switzerland (e.g., Balachandran et al, 2004; Kryzanowski and Hao, 1991; Barnes and Ma, 2004; Bechmann and Raaballe, 2007; Wulff, 2002; Leledakis et al, 2009; Papaioannou et al, 2000; Wu and Chan, 1997; Lukose and Rao, 2002; Kato and Tsay, 2002; Dhatt et al, 1997; and Kunz and Rosa‐Majhensek, 2008). …”
supporting
confidence: 68%
“…Overall, the aggregate average of BDR of 175% is substantially higher than the averages in other markets such as 100% in India, 69% in Greece, 30% in China, 18% in Australia, 11% in US, and 9% in Japan. However, our average BDR is lower than 245% for stock dividends in Denmark, with similar market settings and motivations as in Turkey (Lukose and Rao, 2002; Papaioannou et al, 2000; Barnes and Ma, 2004; Balachandran et al, 2004; Lakonishok and Lev, 1987; Kato and Tsay, 2002; and Bechmann and Raaballe, 2007).…”
We assess the market valuation of an unusual form of stock dividends, referred to as bonus distributions, which are carried out by transferring the accumulated equity reserves, mainly the inflation revaluation equity reserves, to paid-in capital leaving the total equity unchanged. In the absence of cash substitution and transaction cost effects, we find positive excess returns on the announcement dates, particularly for the financially weak firms, such as the non-cash-dividend-paying firms. We relate our results to the 'paid-in capital hypothesis' under which firms opt for bonus distributions to mitigate the impact of inflation on their eroding paid-in capital, to reduce their leverage defined as debt-to-paid-in-capital ratio, and to increase their credibility and borrowing capacity in a market of limited access to external equity financing. Although our results are also consistent with the retained earnings and signaling hypotheses, we find no support for the attention-getting, and a weak support for the liquidity enhancement hypotheses observed in other markets.
“… See, for example, Grinblatt et al (1984) and Rankine and Stice (1997) for the US evidence. Similar market reactions are also detected in other markets such as Australia, Canada, China, Denmark, Germany, Greece, Hong Kong, India, Japan, Korea and Switzerland (e.g., Balachandran et al, 2004; Kryzanowski and Hao, 1991; Barnes and Ma, 2004; Bechmann and Raaballe, 2007; Wulff, 2002; Leledakis et al, 2009; Papaioannou et al, 2000; Wu and Chan, 1997; Lukose and Rao, 2002; Kato and Tsay, 2002; Dhatt et al, 1997; and Kunz and Rosa‐Majhensek, 2008). …”
supporting
confidence: 68%
“…Overall, the aggregate average of BDR of 175% is substantially higher than the averages in other markets such as 100% in India, 69% in Greece, 30% in China, 18% in Australia, 11% in US, and 9% in Japan. However, our average BDR is lower than 245% for stock dividends in Denmark, with similar market settings and motivations as in Turkey (Lukose and Rao, 2002; Papaioannou et al, 2000; Barnes and Ma, 2004; Balachandran et al, 2004; Lakonishok and Lev, 1987; Kato and Tsay, 2002; and Bechmann and Raaballe, 2007).…”
We assess the market valuation of an unusual form of stock dividends, referred to as bonus distributions, which are carried out by transferring the accumulated equity reserves, mainly the inflation revaluation equity reserves, to paid-in capital leaving the total equity unchanged. In the absence of cash substitution and transaction cost effects, we find positive excess returns on the announcement dates, particularly for the financially weak firms, such as the non-cash-dividend-paying firms. We relate our results to the 'paid-in capital hypothesis' under which firms opt for bonus distributions to mitigate the impact of inflation on their eroding paid-in capital, to reduce their leverage defined as debt-to-paid-in-capital ratio, and to increase their credibility and borrowing capacity in a market of limited access to external equity financing. Although our results are also consistent with the retained earnings and signaling hypotheses, we find no support for the attention-getting, and a weak support for the liquidity enhancement hypotheses observed in other markets.
“…Firstly, this is a simple, straight-forward and widely used model (Agrawal, Kishore & Rao 2006;Altman, Gande & Saunders 2004;Barnes & Ma 2001;Brown 1999;Charitou, Vafeas & Zachariades 2005;Gao & Tse 2004;Jones & Danbolt 2004;Soongswang 2007;Travlos, Trigeorgis & Vafeas 2001). Secondly, many studies (Agrawal et al 2006;Altman et al 2004;Barnes & Ma 2001;Charitou et al 2005;Gao & Tse 2004;Kang et al 1995;Soongswang 2007;Travlos et al 2001) have shown that results obtained from market-adjusted returns model and other models, such as the market model and mean adjusted returns model, do not exhibit significant differences. Brown andWarner (1980, 1985) also confirm that event studies based on both the market model and the market-adjusted returns model indicate that the two models are equally as powerful in detecting abnormal returns.…”
The study investigates the impact of debt securities issuance on the equity market behavior of the issuers. Event study results reveal that overall debt securities issuers experience an increase in equity return and a decrease in systematic risk, while total risk remains unchanged. The further examination of the 100 debt securities issuing companies finds significant differences between hybrid and non-hybrid debt securities issues. Hybrid debt securities experience a significant increase in equity return, decline in systematic risk and increase in total risk. Non-hybrid debt securities issues, however, are found to have no impact on equity market behavior. The findings of the study imply that the general decline in systematic risk for debt securities issuing companies could motivate the issuance of debt securities, particularly the hybrid type, and thus improve market liquidity. Further, non-hybrid debt securities may not be the appropriate alternative for sending a market signal as no impact on market behavior is found following the issuance. ABSTRAK Kajian ini menguji kesan penerbitan sekuriti hutang terhadap kelakuan pasaran ekuiti penerbit. Keputusan kajian peristiwa menunjukkan syarikat yang menerbitkan sekuriti hutang mengalami peningkatan dalam pulangan ekuiti dan penurunan dalam risiko sistematik manakala risiko keseluruhan tidak berubah. Pemeriksaan selanjutnya ke atas 100 syarikat yang menerbitkan sekuriti hutang mendapati wujud perbezaan antara sekuriti hutang kacukan dengan bukan-kacukan. Sekuriti hutang kacukan mengalami perubahan yang signifikan iaitu peningkatan dalam pulangan ekuiti, penurunan dalam risiko sistematik dan peningkatan dalam risiko keseluruhan. Sebaliknya, terbitan sekuriti hutang bukan-kacukan didapati tidak mempengaruhi kelakuan pasaran ekuiti. Implikasi hasil kajian ini adalah penurunan risiko sistematik bagi syarikat yang menerbitkan sekuriti hutang mampu mendorong penerbitan sekuriti ini, terutamanya jenis kacukan, yang akhirnya dapat meningkatkan kecairan pasaran. Selain daripada itu, sekuriti hutang bukan-kacukan mungkin bukan pilihan yang sesuai untuk memberi isyarat pasaran kerana terbitan sekuriti ini tidak memberi kesan kepada kelakuan pasaran ekuiti.
“…The analysis reveals a significant decline in the market-adjusted trading volume in the post dividend period. Barnes and Ma (2002) investigated the reaction of stock price to the announcement of bonus issue for Chinese stock market. The announcements with high bonus ratio lead to significantly positive return for both Chinese as well as foreign traders.…”
Section: Foreign Research Studies Related To Bonus Issues Announcementsmentioning
The purpose of this paper is to find the determinants affecting the abnormal returns from bonus announcements for the period 2006 through 2014. The paper uses regression model for the study. The findings reveal that the firm size has a significant role in declining the abnormal returns. Promoters’ holding and abnormal returns are found to have significant and negative relation. The pre-cumulative average abnormal returns are responsible for significant improvement in abnormal returns. The abnormal returns in both the pre-crisis and post-crisis period were negative. The companies belonging to services sector generated significantly higher abnormal returns than the manufacturing sector.
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