Over the years, the corporate event announcement and its impact on stock price movement are one of the interesting and debatable issues among research scholars, analysts, fund mangers and policy makers. The corporate event and returns offered by stock are studied by many financial literatures. The scholars who are in favor of EMH, they are not agreeing with abnormal return at event announcement. Because the strong form of EMH viewed that the stock prices reflect all information and investors are not able to generate above average return. In the capital market the events like Bonus share, split share, right share, dividend announcement, earning announcement, change in BoD and change in capital structure create the headlines. According to strong-form of EMH, the capital market absorbs the event related information quickly and correctly.
This paper focused on relationship between bonus share announcement and stock prices. The main objective of the study was to understand the impact of bonus share announcement on stock price. And also to find out any profitable pattern which can helpful to the investors. According to theory, bonus share increases the number of outstanding shares but no effects on stockholder's proportional ownership of stocks. So, there should not be any significant price movement on bonus share announcement. But some of the literatures conclude that the earning announcement, bonus announcement and other events generate significant price impact. Total 44 bonus announcement made during the period of 1st January, 2011 to 31st December, 2011. From the 44 companies 33 companies fulfill all requirements for the study. The historical prices for the said period were collected form the BSE and NSE's websites. The Daily Abnormal return, Cumulative Abnormal Return, Cumulative
average abnormal return, Average Security Return variability, Correlation, T test and Z test was used to analyze the data. The study found that Indian market is in semi-strong form in long duration. But in short duration, investor can generate above average profit. There is no significant difference between the abnormal return of pre-announcement return and post-announcement return. On the event day stocks generate abnormal return.
ASRV, CAR, CAAR, T test and Z test
