Impact of Bonus Issue on Stock Returns -Evidence from Bombay Stock Exchange, India

Abstract

Bonus Share Issue a tool used by managers to capitalize companies profits and satisfy shareholders by issuing them free equity shares in a ratio they already own. Any kind of corporate action affects the company’s image but, bonus share announcements affect on shareholders wealth is an old age topic of discussions for researchers. This study is an attempt to examine the impact of bonus share issue announcement on shareholders earnings.the study has been conducted on companies listed in Sensex index. The study computes Average Abnormal Return (AAR) and Cumulative Average Abnormal Return (CAAR) for the event window of 21 days. A T-test was also carried out to check the significance of data. The study can be used by practitioners, investors, academicians, and policyholders while framing policies for the company.