Project Report on "Impact of Corporate Action on Selected Stocks of Bombay Stock Exchange

Department of Business Administration

Rani Channamma University,

Belagavi

A Project Report On

“A study on Corporate Actions on Selected Stocks

of Bombay Stock Exchange”

Submitted By

SAIDUSAB DANGI

MB141041

2015-16

In Partial Fulfillment Of

Master of Business Administration

June, 2016

Under the guidance of

Internal Guide

Prof. Vishnukant S. Chatpalli

Company Guide

Santosh Tikare

Declaration

I hereby declare that project Titled “A Study on Impact of Corporate Actions

on Selected Stocks of Bombay Stock Exchange” submitted by me to the Department of

Business Administration, Rani Channamma University, Belagavi, in partial fulfillment of

the requirement for the award of degree of Master of Business Administration is an

original work carried out by me under the guidance and supervision of Prof. Vishnukant

S. Chatpalli. The information has been collected from genuine & authentic sources.

The project report is not submitted to any other university/institute for the award

of any degree/diploma and it has been individually carried out as part of Student

Internship Project, means for academic purpose only.

Thanking You

SAIDUSAB DANGI

Acknowledgement

A summer project is a golden opportunity for learning and self-development. I

consider myself very lucky and honored to have so many wonderful people lead me

through in completion of this project. On the very outset of this report, I would like to

extend my sincere & heartfelt obligation towards all the personages who have helped me

in this endeavor. Without their active guidance, help, cooperation & encouragement, I

would not have made headway in the project.

I am thankful to our Honorable Chairman Dr. S. C. Patil for giving me a big

opportunity under grow internship Project

I express my deepest thanks to my internal guide Prof. Vishnukant S. Chatpalli

for their guidance and support. He supported to us by showing different method of

information collection about the company. He helped all time when we needed and he

gave right direction toward completion of project.

I wish to express my indebted gratitude and special thanks to Mr. Santosh

Tikare, Sharewealth Securities Ltd Belgaum who in spite of being extraordinarily busy

with his duties, took time out to hear, guide and keep me on the correct path and allowing

me to carry out my industrial project work at their esteemed organization and extending

during the training.

I also acknowledge with a deep sense of reverence, my gratitude towards my

parents and member of my family, who has always supported me morally as well as

economically.

At last but not least gratitude goes to all of my friends who directly or indirectly

helped me to complete this project report.

Any omission in this brief acknowledgement does not mean lack of gratitude.

Thanking You

SAIDUSAB DANGI

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Executive Summary

Corporate events have numerous effects on the stock market and it is been

observed that stock price movements is an area of research that attracted the attention

of various researchers. Therefore, the present study attempts to contribute to the

understanding of the behavior of Indian share prices in relation to corporate actions. A

standard event study methodology is adopted in this study to examine the impact and

price reactions of BSE Sensex companies of BSE from January 2015 to December

2015 surrounding 60 days of the announcement dates. Abnormal returns were

calculated and t-tests are conducted to test the significance. From the study, it can be

inferred that stock split, Rights issue, Bonus, Dividend, Mergers and Buy-back of

stocks etc. announcement have positive impact of stock prices around announcement

dates.

Corporate actions are the actions initiated at the corporate level having

material impact on the company’s financial structure and ultimately the stakeholders

who are the owners of company.

This study is focused on the effect of various corporate actions like bonus

issue, rights issue, stock split, mergers, buy back of stocks etc. It covers the wider

range of shares from sectors comprised in Sensex index and investigates the corporate

announcement effects on Sensex companies and the abnormal change in the price

movements and liquidity around the announcement and effective date of action.

The proposed study is descriptive in nature, purely based on secondary data.

Companies listed under the BSE 100 index have been selected at a random basis.

Event study methodology is used to data analysis, which tries to measure the effect of

an event and how quickly these events are reflected in asset prices, is used to analyses

the effect of the selected events, Dividend, Stock split, Merger & Acquisition and

Bonus issue.

In this method two-stage approach is used to test the stock price responses to

corporate action announcement. The first stage consists of estimation of parameter

like beta based on the ex-post returns on stocks and market index, and expected

returns on each of the stocks based on the market model.

In the second stage these estimated parameters are used to calculate abnormal

returns around the event day. In this study, the date of corporate action announcement

is defined as day 0 or event day. If event day is a non-trading day then the

immediately following trading day is considered as an event day. Pre-announcement

period includes 30 trading days prior to the corporate action announcement date, (-30

to -1). Post-announcement period includes 30 trading days after the corporate action

announcement (+1 to +30). Thus, we have taken the event window of 61 trading days

(including day 0 as the event day).

All the companies in BSE Sensex 100 index forms the population. From the

total population, the sample set for each event is selected based on the availability of

the dates of announcement of stock split, Bonus, Dividend and mergers and

acquisition among BSE Sensex listed companies of BSE during January 2015 to

December 2015 have been considered as the sample size, and only recent 5 companies

from each event are selected for the data analysis. Study used event study method to

analyze the data.

Overall company analysis shows that more number of positive abnormal

returns before corporate action announcement & less number of positive abnormal

returns after announcement. Hence, it can be stated that market reacts to corporate

action announcement positively before announcement and less positive after the

announcement. Paired sample t test proves that corporate action announcement exerts

an impact on share price. This study is of immense utility to investors as they can

understand changes in share prices of companies and market movement during bonus

announcements that would be helpful to them for making good portfolio investment

decision in the right time.

Dept. Business Administration, RCU Belagavi P a g e | 1

Table of Contents

1. Introduction ............................................................................................ 2

1.1. Background of the Study ................................................................ 13

1.2. Statement of the Problem ............................................................... 13

1.3. Objectives of the Study ................................................................... 13

2. Literature Review .................................................................................. 14

3. Research Methodology ......................................................................... 20

3.1. Research Design ............................................................................. 20

3.2. Sample Design-Population, Sampling method, .......................... 20

3.3. Data Sources .................................................................................... 21

3.4. Hypothesis ........................................................................................ 21

3.5. Data Analysis Tools ......................................................................... 21

3.6. Limitations of Study....................................................................... 22

4. SHAREWEALTH SECURITIES LTD ......................................... 23

4.1. Historical Background ...................................................................... 23

4.2. Vision & Mission ............................................................................... 23

4.3. Organizational Structure .................................................................. 24

4.4. Product /Service Profile .................................................................. 26

4.5. Area of Operation .............................................................................. 29

4.6. Current Status ................................................................................... 30

4.9. SWOT Analysis ................................................................................ 30

5. Data Analysis ......................................................................................... 32

6. Findings ................................................................................................. 86

7. Recommendations ................................................................................ 87

Conclusion ................................................................................................... 87


1. Introduction

Stock market securities are more than a passive token of investment value to those

who deal in it. In the present day financial markets, investment has become complicated

and is both an art and science. The art of the investment is to see that the return is

maximized with the minimum of risk, which is inherent in investments. A number of

factors – both internal and external to the organization can cause changes in the returns of

the securities and a study of these factors and the pattern of their impact on security

returns have generated considerable interest to all the stake holders of the capital market.

The cumulative effect of a number of corporate actions can cause a share to

undergo a complete metamorphosis. By means of corporate actions, securities acquire a

life of their own and an ability to transform them and make investors change their

decision patterns. Corporate actions and the consequent corporate information are

potential sources that capital markets may use in revising the prices of common stocks.

The starting point of corporate actions is the ownership of individual units of

investments. The ownership of common stock gives the investor the right to elect board

of directors, vote for corporate actions that require shareholder approval, share in

corporate earnings in the form of dividends, to participate additional shares being issued

(Right issue), and to retrieve residual assets of the company at the time of liquidation. So,

along with ownership of shares, there are benefits and rules to protect the rights attached

to each share.

The type and kind of corporate action would vary according to the way it is being

defined. As per one definition, the corporate action is described as “an event initiated by

a company that affects its share”. Another one goes like this “a corporate action occurs,

when changes are made to capital structure or financial position of an issuer of a security

that affect any of the securities it has issued or shareholders”.

Out of these four corporate actions which are selected as the events, two of them

do have monetary implications and the other two have strategic implications. As is

evident, dividend and bonus issue are having monetary implication and stock split and

merger information are having strategic implication as far as the shareholders are

concerned. In short, the representativeness of the sampling done in order to select the four


events for the study have become comprehensive by incorporating events having

monetary and strategic dimensions.

Corporate actions are the actions initiated at the corporate level having material

impact on the company’s financial structure and ultimately the stakeholders who are the

owners of company.

In other words corporate actions are events initiated by issuer of securities that

directly or indirectly affects its shareholders or bondholders, whether positively or

negatively.

Types of Corporate Actions

Corporate actions are classified as mandatory, voluntary and mandatory with

choice corporate actions.

I. Mandatory Corporate Action:

A mandatory corporate action is an event initiated by the corporation by the board

of directors that affects all shareholders. Participation of shareholders is mandatory for

these corporate actions. Mandatory Corporate Actions Includes Cash Dividend, Stock

Splits, Mergers, Pre-refunding, Return of capital, Bonus Issue, Asset ID Change, Pari-

passu and Spinoffs.

A. Stock Split and Reverse Spilt: A corporate action in which a company’s existing shares

are divided into multiple shares. Stock split divides each of the outstanding shares of a

company, thereby lowering the price per share - the market will adjust the price on the

day the action is implemented.

When a stock split is declared by the company the number of shares held

increases but the investment value/market capitalization remains the same similar to

bonus issue. The stock is split with reference to the face value. Suppose the stock’s face

value is Rs.10, and there is a 1:1 stock split then the face value will change to Rs.5. If you

owned 1 share before split you would now own 2 shares after the split.

Similar to bonus issue, stock split is usually to encourage more retail participation

by reducing the value per share.


How to benefit from this news Stock - splits/Reverse splits normally increase

the liquidity of stocks and now there are more buyers and sellers for the same stock.

Normally companies announce splits if they are quite confident about the future growth

prospects. One can invest and benefit from this news if the company is a quality

company.

B. Spin-Offs: Spin off means a company breaking up itself into smaller units. The creation

of an independent company through the sale or distribution of new shares of an existing

business/division of a parent company.

C. Mergers and Acquisitions: Mergers is an event where two or more companies merge

into one aiming to be more competitive and for more profitability. Likewise Acquisition

means a bigger company acquiring a smaller one for further expansion.

How to benefit from this news normally - whenever Target Company is

acquired the acquiring company has to pay a premium for this purchase which in turn

results in increase in stock price of the target company in short term. As the acquiring

company has to pay the premium its stock price decreases in short term. An investor can

use acquisition news to buy into Target Company and sell parent company in order to

gain in short term.

D. Bonus Issue: It is an additional dividend given to the shareholders that can be in cash or

in the form of stock. When companies have outstanding performance with surplus profit,

they may decide to issue bonus to the shareholders.

A bonus issue is a stock dividend, allotted by the company to reward the

shareholders. The bonus shares are issued out of the reserves of the company. These are

free shares that the shareholders receive against shares that they currently hold. These

allotments typically come in a fixed ratio such as, 1:1, 2:1, 3:1 etc.

If the ratio is 2:1 ratio, the existing shareholders get 2 additional shares for every

1 share they hold at no additional cost. So if a shareholder owns 100 shares then he will

be issued an additional 200 shares, so his total holding will become 300 shares. When the

bonus shares are issued, the number of shares the shareholder holds will increase but the

overall value of investment will remain the same.

Similar to the dividend issue there is a bonus announcement date, ex-bonus date,

and record date. Companies issue bonus shares to encourage retail participation,


especially when the price per share of a company is very high and it becomes tough for

new investors to buy shares. By issuing bonus shares, the number of outstanding shares

increases, but the value of each share reduces as shown in the example above.

II. Voluntary Corporate Action :

Voluntary corporate actions are actions requiring a decision from the investor on

whether or not to participate. Corporation will not process these actions automatically

because the decision on whether to participate will vary for every investor. Shareholders

may choose to take no action which will leave their securities unaffected by the

Corporate Action. Voluntary corporate action includes Tender Offer, Rights issue,

making buyback offers to the shareholders while delisting the company from the stock

exchange etc.

A. Buyback: Buyback is an action in which company offers to buys back its stock from the

current shareholders at an attractive price.

A buyback can be seen as a method for company to invest in itself by buying

shares from other investors in the market. Buybacks reduce the number of shares

outstanding in the market; however buyback of shares is an important method of

corporate restructuring. There could be many reasons why corporate choose to buy back

shares.

When a company announces a buy back, it signals the company’s confidence

about itself. Hence this is usually a positive for the share price.

How to benefit from this news – If based on your fundamental research you find out

that a company is undervalued and at the same time company management announces a

buyback offer its wise to invest in that stock. When the market condition improves you

will reap a handsome benefit out of this investment.

B. Rights Issue: It refers to offering additional shares to the current shareholders of the

stock. This is done by companies to raise capital for further expansion which provide its

existing shareholders the right to buy the stock at discounted rates than price making it

more lucrative.


The idea behind a rights issue is to raise fresh capital. However instead of going

public, the company approaches their existing shareholders Think about the rights issue

as a second IPO but for a select group of people (existing shareholders).

The rights issue could be an indication of a promising new development in the

company. The shareholders can subscribe to the rights issue in the proportion of their

shareholding. For example 1:4 rights issue means for every 4 shares a shareholder owns,

he can subscribe to 1 additional share. Needless to say the new shares under the rights

issue will be issued at a lower price than what prevails in the markets.

However, a word of caution – The investor should not be swayed by the discount

offered by the company but they should look beyond that. Rights issue is different from

bonus issue as one is paying money to acquire shares. Hence the shareholder should

subscribe only if he or she is completely convinced about the future of the company.

Also, if the market price is below the subscription price/right issue price it is obviously

cheaper to buy it from the open market.

C. Mandatory With Choice Corporate Action :

This corporate action is a mandatory corporate action for the shareholder but they are

being presented with options. An example is cash or stock dividend option with one of

the options as default. Shareholders may or may not submit their elections. In case a

shareholder does not submit the election, the default option will be applied.

Dividend Payouts: Dividend is the payment made to the investor for sharing the profits a

company has made. It can be cash dividend or stock dividend where company offers

stock as a dividend to the current shareholders.

Dividends are paid on a per share basis. For example, during the financial year

2012-13 Infosys had declared a dividend of Rs.42 per share. The dividend paid is also

expressed as a percentage of the face value. In the above case, the face value of Infosys

was Rs.5/- and the dividend paid was Rs.42/- hence the dividend payout is said to be

840% (42/5).

It is not mandatory to pay out the dividends every year. If the company feels that

instead of paying dividends to shareholders they are better off utilizing the same cash to

fund new project for a better future, then can do so.


Besides, the dividends need not be paid from the profits alone. If the company has

made a loss during the year but it does hold a healthy cash reserve, then the company can

still pay dividends from its cash reserves.

Sometimes distributing the dividends may be the best way forward for the

company. When the growth opportunities for the company have exhausted and the

company holds excess cash, it would make sense for the company to reward its

shareholders thereby repaying the trust the shareholders hold in the company.

The decision to pay dividend is taken in the Annual General Meeting (AGM)

during which the directors of the company meet. The dividends are not paid right after

the announcement. This is because the shares are traded throughout the year and it would

be difficult to identify who gets the dividend and who doesn’t. The following timeline

would help you understand the dividend cycle.

Dividend Declaration Date: This is the date on which the AGM takes place and the

company’s board approves the dividend issue

Record Date: This is the date on which the company decides to review the shareholders

register to list down all the eligible shareholders for the dividend. Usually the time

difference between the dividend declaration date and record date is at least 30 days

Ex-Date/Ex-Dividend date: The ex-dividend date is normally set two business days

before the record date. Only shareholders who own the shares before the ex-dividend date

are entitled to the dividend. This is because in India the normal settlement is on T+2

bases. So for all practical purposes if you want to be entitled for dividend you need to

ensure you buy the shares before the ex-dividend date.

Dividend Payout Date: This is the day on which the dividends are paid out to

shareholders listed in the register of the company.

Cum Dividend: The shares are said to be cum dividend till the ex-dividend date.

When the stock goes ex dividend, usually the stock drops to the extent of

dividends paid. For example if ITC (trading at Rs. 335) has declared a dividend of Rs.5.

On ex-date the stock price will drop to the extent of dividend paid, and as in this case the

http://zerodha.com/varsity/wp-content/uploads/2014/09/ch11-diagram.png


price of ITC will drop down to Rs.330. The reason for this price drop is because the

amount paid out no longer belongs to the company.

Dividends can be paid anytime during the financial year. If it’s paid during the

financial year it is called the interim dividend. If the dividend is paid at the end of the

financial year it is called the final dividend.

How to benefit from this news – Let’s say stock price for company A is Rs 100 today.

There is a dividend declaration of Rs 2/share. That means each stock holder will get Rs

2/share as cash if he holds stocks of company A on or before Ex-dividend date. As

markets react to every good news stock price of company A will reach Rs 102 or even

higher before Ex-dividend date. As dividend declaration results in stock price

appreciation, make a list of good dividend declaring companies and figure out in which

quarter and round what date they declare dividends. Invest in them before dividend

declaration date and benefit from price appreciation.

Introduction of Stock Market (Industry Profile)

The history of the Indian capital market, in particular can be traced back to 1861

when the American civil war began. Several companies were formed during this period

and many banks came to the fore to handle the finances registered under the British

companies act. The stock exchange Mumbai came into existences in 1875. It was an

unincorporated body of stockbrokers, which started doing business in the city under a

banyan tree. Business as essentially confined to company owners and brokers, with very

little interest evinced by the general public. There had been much fluctuation in the stock

market on account of the American war and battles in Europe.

History of Indian stock exchange

Indian stock market is one of the oldest in Asia. Its history dates back to nearly

200 years ago. In 1887, they formally established in Bombay, the “native share and stock

brokers association” (which is alternatively known as “the stock exchange “). In 1895,

the stock exchange acquired a premise in the same street and it was inaugurated in 1899.

Thus, the stock exchange at Bombay was consolidated.


History of Indian Stock Market: Indian stock market marks to be one of the oldest

stock market in Asia. It dates back to the close of 18th century when the East India

Company used to transact loan securities. In the 1830s, trading on corporate stocks and

shares in Bank and Cotton presses took place in Bombay.

Though the trading was broad but the brokers were hardly half dozen during 1840

and 1850. An informal group of 22 stockbrokers began trading under a banyan tree

opposite the Town Hall of Bombay from the mid-1850s, each investing a (then) princely

amount of Rupee 1. This banyan tree still stands in the Horniman Circle Park, Mumbai.

In 1860, the exchange flourished with 60 brokers. In fact the 'Share Mania' in India began

with the American Civil War broke and the cotton supply from the US to Europe stopped.

Further the brokers increased to 250. The informal group of stockbrokers organized

themselves as the native Share and Stockbrokers Association which, in 1875, was

formally organized as the Bombay Stock Exchange (BSE). BSE was shifted to an old

building near the Town Hall. In 1928, the plot of land on which the BSE building now

stands (at the intersection of Dalal Street, Bombay Samachar Marg and Ham Street in

downtown Mumbai) was acquired, and a building was constructed and occupied in 1930.

In 1956, the Government of India recognized the Bombay Stock Exchange as the

first stock exchange in the country under the Securities Contracts (Regulation) Act. The

most decisive period in the history of the BSE took place after 1992. In the aftermath of a

major scandal with market manipulation involving a BSE member named Harshad

Mehta, BSE responded to calls for reform with intransigence. The foot-dragging by the

BSE helped radicalize the position of the government, which encouraged the creation of

the National Stock Exchange (NSE), which created an electronic marketplace. NSE

started trading on 4 November 1994. Within less than a year, NSE turnover exceeded the

BSE. BSE rapidly automated, but it never caught up with NSE spot market turnover. The

second strategic failure at BSE came in the following two years. NSE embarked on the

launch of equity derivatives trading. BSE responded by political effort, with a friendly

SEBI chairman (D. R. Mehta) aimed at blocking equity derivatives trading. The BSE and

D. R. Mehta succeeded in delaying the onset of equity derivatives trading by roughly five

years. But this trading, and the accompanying shift of the spot market to rolling

settlement, did come along in 2000 and 2001 - helped by another major scandal at BSE


involving the then President Mr. Anand Rathi. NSE scored nearly 100% market share in

the runaway success of equity derivatives trading, thus consigning BSE into clearly

second place. Today, NSE has roughly 66% of equity spot turnover and roughly 100% of

equity derivatives turnover. Stock Exchange provides a trading platform, where buyers

and sellers can meet to transact in securities.

Meaning of stock exchange

Stock Exchanges are an organized marketplace, either corporation or mutual

organization, where members of the organization gather to trade company stocks or other

securities. The members may act either as agents for their customers, or as principals for

their own accounts.

Stock Markets:

Stock Market is a market where the trading of company stock, both listed

securities and unlisted takes place. It is different from stock exchange because it includes

all the national stock exchanges of the country. For example, we use the term, "the stock

market was up today" or "the stock market bubble."

The Indian market has 22 stock exchanges. The larger companies are enlisted with BSE

and NSE. The smaller and medium companies are listed with OTCEI (Over The counter

Exchange of India). These stock exchanges are located in Delhi, Mumbai, Bangalore,

Ahmadabad, etc

Bombay stock exchange (BSE)

BSE is the oldest stock exchange in Asia. The extensiveness of the indigenous

equity broking industry in India led to the formation of the Native Share Brokers

Association in1875, which later became Bombay Stock Exchange Limited (BSE). BSE is

widely recognized due to its pivotal and pre-eminent role in the development of the

Indian capital Market. In 1995, the trading system transformed from open outcry system

to an online screen-based order-driven trading system.

BSE has a nation-wide reach with a presence in more than 450 cities and towns of

India. BSE has always been at par with the international standards. It is the first exchange

in India and the second in the world to obtain an ISO 9001:2000 certifications. The equity

market capitalization of the companies listed on the BSE was US$1.93 trillion as of


December 2013, making it the 4th largest stock exchange in Asia and the 8th largest in

the world. The BSE has the largest number of listed companies in the world. As of June

2013, there are over 5,085 listed Indian companies and over 8,196 scrips on the stock

exchange, the Bombay Stock Exchange has a significant trading volume. Though many

other exchanges exist, BSE and the National Stock Exchange of India account for the

majority of the equity trading in India.

The Bombay stock exchange limited, (formerly the stock exchange, Mumbai;

popularly called as BSE) is the oldest stock exchange in Asia with a rich heritage. It is

located at Dalal Street, Mumbai; India. BSE was established in 1875 as “the native share

and stock brokers”. It was the first stock exchange in the country to obtain permanent

recognition in 1956 from the Government of India under the securities contract Act 1956.

There are around 4700 companies listed with stock exchange and has a significant trading

volume. Over the past 133 years, BSE has facilitated the growth of the Indian corporate

sector by providing it with an efficient access to resources. There is perhaps no major

corporate in India which has not sourced BSE’s services in raising resources from the

capital market today, BSE is the world number 1 exchange in terms of the number of

listed companies and the world’s 5th

in transaction numbers,. The market capitalization

as on Jan 31, 2014 stood at USD 1.79 trillion.

National Stock Exchange (NSE):

With the liberalization of the Indian economy, it was found inevitable to lift the

Indian stock market trading system on par with the international standards. On the basis

of the recommendations of high powered Pherwani Committee, the National Stock

Exchange was incorporated in 1992 by Industrial Development Bank of India (IDBI),

Industrial Credit and Investment Corporation of India (ICICI), Industrial Finance

Corporation of India (IFCI), all Insurance Corporations, selected commercial banks and

others. Trading at NSE takes place through a fully automated screen-based trading

mechanism which adopts the principle of an order-driven market. Trading members can

stay at their offices and execute the trading, since they are linked through a

communication network. The prices at which the buyer and seller are willing to transact

will appear on the screen. When the prices match the transaction will be completed and a

confirmation slip will be printed at the office of the trading member.


NSE has several advantages over the traditional trading exchanges. They are as follows:

NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-market

operations is streamlined coupled with the countrywide access to the securities.

Delays in communication, late payments and the malpractice’s prevailing in the

traditional trading

Mechanism can be done away with greater operational efficiency and

informational transparency in the Stock market operations, with the support of total

computerized network. The National stock exchange of India limited has genesis in the

report of the high powered study group on establishment of new stock exchanges. Which

recommended promotion of a National stock exchange by financial institutions (FIs) to

provide access to investors from all across the country on an equal footing? Based on the

recommendations, NSE was promoted by leading financial institutions at the behest of

the Government of India and was incorporated in November 1992 as a tax-paying

company unlike other stock exchange in the country. Indian markets have recently

thrown open a new avenue for retail investors and traders to participate: commodity

derivatives. For those who want to diversify their portfolios beyond shares, bonds and

real estate, commodities are the best option. Till some months ago, this wouldn't have

made sense. For retail investors could have done very little to actually invest in

commodities such as gold and silver -- or oilseeds in the futures market. This was nearly

impossible in commodities except for gold and silver as there was practically no retail

avenue for punting in commodities. However, with the setting up of three multi-

commodity exchanges in the country, retail investors can now trade in commodity futures

without having physical stocks! Commodities actually offer immense potential to become

a separate asset class for market-savvy investors, arbitrageurs and speculators. Retail

investors, who claim to understand the equity markets, may find commodities an

unfathomable market. But commodities are easy to understand as far as fundamentals of

demand and supply are concerned. Retail investors should understand the risks and

advantages of trading in commodities futures before taking a leap.


1.1. Background of the Study

Corporate events have numerous effects on the stock market and it is been

observed that stock price movements is an area of research that attracted the attention of

various researchers. Therefore, the present study attempts to contribute to the

understanding of the behavior of Indian share prices in relation to corporate actions. A

standard event study methodology is adopted in this study to examine the impact and

price reactions of BSE Sensex companies of BSE from January 2015 to December 2015

surrounding 60 days of the announcement dates. Abnormal returns were calculated and t-

tests are conducted to test the significance. From the study, it can be inferred that stock

split, Rights issue, Bonus, Dividend, Mergers and Buy-back of stocks etc. announcement

have positive impact of stock prices around announcement dates.

1.2. Statement of the Problem

This study is focused on the effect of various corporate actions like bonus issue,

rights issue, stock split, mergers, buy back of stocks etc. It covers the wider range of

shares from sectors comprised in Sensex index and investigates the corporate

announcement effects on Sensex companies and the abnormal change in the price

movements and liquidity around the announcement and effective date of action.

1.3. Objectives of the Study

a. To study the various important corporate announcements.

b. To assess the impact of Corporate action announcement on share prices

c. To examine whether there is any abnormal returns around the Corporate Action

announcement window.

d. To support informed investors in understanding the price pressure and liquidity

prevailing around the Corporate Action announcement date.

e. To identify the time window (before and after announcement) that maximizes the return

for shareholders.


2. Literature Review

Corporate actions and Share prices

Review - 1

Name of Journal/Report Date Title Author/s

GALAXY

International

Interdisciplinary

Research Journal

January

2014

Corporate Actions And

Impact On Stock Markets

Prices – An Empirical Study

Of Indian Markets

Dr. Kammili

Kamalakara Rao.

Description: - The purpose of this study was to analyze the impact of announcement of

corporate actions of Stock Split, Consolidation and Share buyback on the traded volumes

of the shares on the stock exchanges. This study concluded that corporate actions are

having significant impact on the market price of stocks.

Review - 2


International Journal of

Scientific and Research

Publications

September

2013

A Study on Semi-Strong

Efficiency of Indian

Stock Market

Remya

Ramachandran

Description: The study aims at examining the efficiency of Indian Stock market by

studying stock price and trading volume reaction resultant upon the corporate action

information. If the market is efficient prices fully reflect all information and to evaluate

there is no scope for abnormal returns and dramatic increase in the traded volume

consequent upon such release of information. Here the efficiency of stock market is

tested by analyzing the dissimilation of corporate event announcements like dividend,

Stock Split, merger, Bonus issue


Stock Split and share prices

Review - 1



Management (IJM),

March

2014

Impact Of Stock Split

Announcement On Stock

Prices

D. Bhuvaneshwari

Dr. K.Ramya

Description: - the present study attempts to contribute to the understanding of the

behavior of Indian share prices in relation to stock split announcements. A standard event

study methodology is adopted in this study to examine the impact and price reactions.

The study found that the investors gain significant returns on the announcement date and

around the announcement dates of stock split. t values for both AAR and CAAR was

used to interpret the results. These facts show that stock split announcements leads to

more positive abnormal returns and helps in predicting the future returns and market

efficiency.

Review - 2


Journal of Management

Sciences and

Technology

Feb- 2015

Stock Market Reactions

to Announcements of

Stock Splits

Dr. Swati Mittal

Descriptions: - The objective of this paper is to check whether efficient market

hypothesis holds for Indian stock market or not i.e., whether there is any movement in

share prices before or after the rights issue announcements. The study found that market

reacts positively to this signal and perceives the stock split as good news resulting in the

increase in share prices immediately after the announcement. The results show that the

Indian Capital Market is semi strong efficient as it is using the information relevant for

security valuation and for investment decision making. The role of SEBI can be

instrumental in preventing insider trading so that the confidence of the investors is

maintained and the stock market can become more vibrant and dynamic.


Bonus and share prices

Review - 1


International Academic

Research Journal of

Economics and Finance

March

2015

Stock Price Reaction to

Bonus Issue – Evidence from

Indian Equity Market

M. Muthukamu

Dr. S Rajamohan

.Description: An attempt has been made in this study, to analyze the behavior of the

share prices in the Indian equity market towards the announcements of bonus issue,

taking into account the price movements of the Nifty Index stocks that has announced its

bonus issue, and to find out the impact of the price behavior by comparing the stock

performance with the performance of the market index.

It is observed from the study that the scrip’s in the Nifty Index having higher

bonus ratio witness a positive impact and perform better than the market Index. But at the

same time if the bonus issue is smaller in size, it fails to attract the investors and hence

delivers a negative impact. The research study has also proved that the performance of

that scrip’s having lesser bonus ratio is underperforming compared to the market

performance. Hence it is concluded that the Indian Equity market is also behaving

identical to the major Global Equity Markets in relation to the issue of bonus shares.

Review - 2


Asian Journal of

Finance & Accounting

December

2013

Market Reaction to

Bonus Announcement in

Post

Global Financial Crisis

Era: Evidence from India

Mayank Joshipura

Nusrathunnisa

Description:- In this paper, we analyses market reaction surrounding announcement and

ex-bonus days in post global financial crisis era in Indian markets. Our results show that

bonus announcement leads to some buzz in the market and it reacts positively to such

announcements. If, market is efficient in its semi-strong form, such positive reaction

associated with bonus announcement should be restricted on announcement day only,


however, we can see that market gets some hint of such potential announcement at least

two days before but the biggest positive market reaction is observed on announcement

day itself and not on any of the following day in the announcement window. That

indicates that bonus announcement do carry positive information content and that is

getting reflected just before and immediately on its announcement and that provides

support for information content and some evidence of Indian stock market is efficient in

its semi-strong form.

Dividend and share prices

Review on Dividend - 1



Financial Management

April

2012

Stock Price Reaction to

Dividend Announcements

Shaveta Gupta,

Balram Dogra,

A K Vashisht,

Shevata Ghai

Description: - the present study is an attempt to study the stock price reaction to 65

dividend announcements (increase) by 28 companies during the period 2006-09 listed on

BSE 30 Sensex. Corporate dividend policy certainly matters for the shareholders. The

extent of its effect may be different for different markets depending upon the different

market microstructure, tax regime and control environments. Findings also revealed that

dividend signal sends good news to cause larger price movements than those involving

bad news. This suggests that bad news may be discounted long before the dividend

announcement, so later dividend may carry little information. An alternative explanation

of the positive impact of dividend increase may be that they serve to reduce the potential

exploitation of the smaller shareholders by the larger ones, with different policy

implication regarding the need to enhance the transparency and public confidence. This

study should be regarded as an attempt towards understanding the importance of

corporate payout policy and its impact especially the cash dividend increase.


Review - 2



Information

Technology and

Knowledge

Management

July

2010

Impact Of Dividend

Announcement On Stock

Prices

Neetu Mehndiratta

& Shuchi Gupta

Description: The present study attempts to contribute positively to the understanding of

the behavior of Indian share prices in relation to the dividend announcements. Dividend

announcements usually are considered as the positive signal to the shareholders and its

positive impact on the share prices is also expected.

Using an event study methodology paper find that despite of investors do not gain

significant value in the period preceding as well as on the dividend announcement day,

yet they can gain value in the post announcement period. Investors do shift their security

positions at the time of dividend announcement, which indicate that in post

announcement period there is a possibility of information content in dividend

announcement in NSE. The evidence nevertheless shows that dividend increases lead

more positive abnormal returns, supporting the Efficient Market Hypothesis.

Rights issue and share prices

Review - 1


Researcher World -

Journal of Arts, Science

& Commerce

Oct.

2011

An Empirical Analysis Of

Impact Of Right Issues On

Shareholders Returns Of

Indian Listed Companies

Pooja Miglani

Description: This study explores the impact of right shares issued by Indian companies

that took place during 2005 & 2010. The samples of 32 right issues have been used to

study the announcement effect. The study examines the stock price reaction to

information content of right issues with a view of finding whether Indian stock market is

semi-strong efficient or not. The standard event study methodology has been used for the


purpose of examining the right issue announcement reaction. The study reveals

statistically significant abnormal returns on the announcement & surrounding dates.

Review - 2

Name of

Journal/Report Date Title Author/s

EXCEL

International

Journal of

Multidisciplinary

Management

Studies

July

2012

An Empirical Study On Announcement

Effect Of Right Issue On Share Price

Volatility And Liquidity And Its Impact

On Market Wealth Creation Of Informed

Investors In Bangalore With Special

Reference To Cnx Nifty Stocks Of NSE

Suresha B

And

Dr.Gajendra

Naidu

Description: This paper investigates the market reaction to rights issue announcement

news, using an event study methodology for Nifty stocks from 1995 to 2011 and also

examines neglected firm hypothesis, Price pressure hypothesis. It is also observed that

there is no significant change in trade volume for the observations stocks during event

window. The study concludes that the Indian market reacts negatively to rights issue

announcement.


3. Research Methodology

The proposed study is descriptive in nature, purely based on secondary data.

Companies listed under the BSE 100 index have been selected at a random basis. Event

study methodology is used to data analysis, which tries to measure the effect of an event

and how quickly these events are reflected in asset prices, is used to analyses the effect of

the selected events, Dividend, Stock split, Merger & Acquisition and Bonus issue.

In this method two-stage approach is used to test the stock price responses to

corporate action announcement. The first stage consists of estimation of parameter like

beta based on the ex-post returns on stocks and market index, and expected returns on

each of the stocks based on the market model.

In the second stage these estimated parameters are used to calculate abnormal

returns around the event day. In this study, the date of corporate action announcement is

defined as day 0 or event day. If event day is a non-trading day then the immediately

following trading day is considered as an event day. Pre-announcement period includes

30 trading days prior to the corporate action announcement date, (-30 to -1). Post-

announcement period includes 30 trading days after the corporate action announcement

(+1 to +30). Thus, we have taken the event window of 61 trading days (including day 0

as the event day).

3.1. Research Design

The research design for the study is conclusive in nature as conclusive research

tests hypothesis of the problem and draws definite conclusion for implementation.

3.2. Sample Design-Population, Sampling method,

All the companies in BSE Sensex index forms the population. From the total

population, the sample set for each event is selected based on the availability of the dates

of announcement of stock split, Bonus, Dividend and mergers and acquisition among

BSE Sensex listed companies of BSE during January 2015 to December 2015 have been

considered as the sample size, and only recent 5 companies from each event are selected

for the data analysis


3.3. Data Sources

Three sets of data have been used in this study. The first set of data consists of corporate

actions announcement made by the sample companies. The source of data from the

published Journals, magazines, newspapers, websites, financial markets etc.

The second set of data consists of daily-adjusted closing prices of the selected stocks

from BSE Sensex Index. Daily-adjusted closing prices are assumed to reflect the

consensus of the market participants regarding price of the stock at the end of the trading.

The third set of data consists of BSE 100 index of ordinary share prices complied and

published by BSE on daily basis. These data have been collected from BSE website

(http://www.bseindia.com). Companies with their company code, BSE symbol and date

of corporate action announcement during the selected range of years.

3.4. Hypothesis

H1: There is a significant impact on the price of shares due to Corporate Actions

H0: There is no impact on the price of shares due to Corporate Actions

3.5. Data Analysis Tools

Calculation of Abnormal Returns

Abnormal return for the purpose of this study has been calculated using the

Market-Adjusted Model. Abnormal return is the difference between actual returns and

expected returns. The expected return is also referred to as marketed returns. Abnormal

returns can be calculated using three models of market model, market adjusted model and

mean adjusted model. Cumulative abnormal return is sum of abnormal returns. Abnormal

return (AR) has been calculated using the following formula:

𝑨𝑹 = 𝑫𝑹 − 𝑬𝑹

Daily return (DR) of the company is calculated using the following formula:

𝑫𝑹 = 𝑳𝒏(𝑪𝒖𝒓𝒆𝒏𝒕 𝑹𝒆𝒕𝒖𝒓𝒏

𝑷𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝑹𝒆𝒕𝒖𝒓𝒏)

Expected Return (ER) of the company is calculated using the following formula:

𝑬𝑹 = 𝜶 + 𝜷(𝑴𝑹)

The same formula has also been used for calculation of market return (MR).


𝑴𝑹 = 𝑳𝑵 (𝑪𝒖𝒓𝒆𝒏𝒕 𝑹𝒆𝒕𝒖𝒓𝒏

𝑷𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝑹𝒆𝒕𝒖𝒓𝒏)

t Test:

The 5% (1.69) level of significance with appropriate degree of freedom was used

to test the null hypothesis of no significant abnormal returns after the event day. The

conclusions are based on the results of t values on ARs for the event window. The t test

statistics for AR for each day during the event window is calculated as:

𝒕(𝑨𝑹) =𝑨𝑹

𝑺𝒕𝒂𝒏𝒅𝒂𝒓𝒅 𝒆𝒓𝒓𝒐𝒓

3.6. Limitations of Study

a. Study is limited to only stocks of BSE 100 Index.

b. Study of corporate actions is limited to Dividend, Bonus, Stock splits and Merger &

Acquisition only.

c. The data collection was for only period of 1 year (January 2015 to December 2015).

d. Research methodology and data analysis tools are limited only “Event Study

Methodology”.

e. Analysis of stock prices is only limited to Pre-announcement period includes 30 trading

days prior to the corporate action announcement date, (-30 to -1). Post-announcement

period includes 30 trading days after the corporate action announcement (+1 to +30).

Thus, we have taken the event window of 61 trading days (including day 0 as the event

day).

f. The time period of the project work was only 2 months

g. The project is mainly depended on secondary sources.


4. Sharewealth Securities Ltd

4.1. Historical Background

Sharewealth is promoted by a group of Financial Market Professionals having

more than 20 years of experience in Financial Markets.

Sharewealth Securities Ltd is the first corporate member of National Stock

Exchange of India Ltd, Bombay Stock Exchange Ltd and MCX Stock Exchange Ltd

(MCX-SX) from THRISSUR, the Cultural Capital of Kerala. Sharewealth is also a

Depository Participant with CDSL (Central Depository Services (India) Ltd).

Corporate Office

4th FLOOR, POOMA COMPLEX,

No. 25 / 469 / 23, M G ROAD,

THRISSUR – 1

PHONE: 0487 - 2436500 (30 Lines)

0487 - 2442351 / 52/ 53/ 54

Website: www.sharewealthindia.com

EMAIL: [email protected]

: [email protected]

4.2. Vision & Mission

"To educate growing investing public in a simple & practical way to help

them to protect their hard earned money and to make more money from financial &

commodity markets", which we mean by "wealth creation simplified"

Competitors

http://www.sharewealthindia.com/

mailto:[email protected]

mailto:[email protected]


There are several financial security companies playing their roles in Indian equity

market. But Sharewealth faces competitions from these few companies.

1. Share Khan (SSKI)

2. Karvy Stock Broking Ltd.

3. Geojit BNP Paribas

4. Religare Securities

5. HDFC Securities

6. Kotak securities

7. Angel Broking Ltd

8. Asith C Mehta stock brokers Ltd

9. Reliance securities Ltd.

10. Anand Rathi

4.3. Organizational Structure

Promoters of the Company

Sharewealth is promoted by a group of Financial Market Professionals having

more than 20 years of experience in Financial Markets, and various professional

dignitaries from different fields of entrepreneurship.

Mr. T.B.Ramakrishnan

(Ramki)

Managing Director & CEO

1. CEO is leading the core team of Sharewealth, which has a

highly competent diversified Board of Directors.

Mr.Ramki is a Stock Market Analyst, Ex. Treasurer &

Governing Council Member of Cochin Stock Exchange

Ltd (1998-2000) and former Kerala Regional Head of

Sharekhan who has got more than 20 years of experience

in Financial Markets.

2. Dr.Anil Menon Chairman

3. Mr.C.G.Surendran Vice-Chairman

4. Mr.Joseph P Antony Executive director

5. Mr. Anchery Ramanathan Directors of the company


6. Mr.T.S.Rajan,

7. Mr. Shibu Cheeran

8. Mr.N.C.Chummar

9. Dr.Saifu Kokkat

10. Mr.N.Nandakumar

11. Mr. Vincent Paliakkara

12. A.Y.Khalid

Group of Company Directors

Mr.N.C.Peethambaran

Mr.T.V.N Girishkumar

Mr.Mani Paul


4.4. Product /Service Profile

A. Equities

The Equities section provides with an insight into the equities segment of NSE &

BSE and also provides real-time quotes and statistics of the equities market. In-depth

information regarding listing of securities, trading systems & processes, clearing and

settlement, risk management, trading statistics etc. are available.

Sharewealth is the registered member of NSE, giving equities at the most importance.

Managing Director & CEO

Chairman

Vice Chairman

Executive Director

Directors of the company

Head Of IT

Support Staff

Managing Director of

MARKETING

Vice President Marketing

Marketing Research Associate

Public Relation

ship Officer

Managing Director of

of Sales

Vice President of

Sales

Team Leader

Sales Representative

Managing Director of SUPPORT

Vice president of

Support

Team Leader of Support

Support Representative

Chief Financial

Office

Accountant

Financial Analyst

Chief Compliance

officer

Lawyer

Corporate associate

Director of Human

Resource

Human Resource manager


Sharewealth provides guidance in the exciting world of stock market with suitable

trading solutions and value-added tools and services to enhance your trading experience.

B. Derivatives

The term "Derivative" indicates that it has no independent value, i.e. its value is

entirely "derived" from the value of the underlying asset. The underlying asset can be

securities, commodities, bullion, currency, livestock or anything else. In other words,

Derivative means a forward, future, option or any other hybrid contract of pre-determined

fixed duration, linked for the purpose of contract fulfillment to the value of a specified

real or financial asset or to an index of securities.

With Securities Laws (Second Amendment) Act,1999, Derivatives has been included in

the definition of Securities. The term Derivative has been defined in Securities Contracts

(Regulations) Act, as:-

A Derivative includes: -

a security derived from a debt instrument, share, loan, whether secured or unsecured, risk

instrument or contract for differences or any other form of security;

a contract which derives its value from the prices, or index of prices, of underlying

securities;

C. Depository

A depository can be compared to a bank. A depository holds securities like

shares, debentures, bonds, Government Securities, units etc. of investors in electronic

form. Besides holding securities, a depository also provides services related to

transactions in securities. At present two Depositories viz. National Securities Depository

Limited (NSDL) and Central Depository Services (I) Limited (CDSL) are registered with

SEBI.

A depository interfaces with the investors through its agents called Depository

Participants (DPs). If an investor wants to avail the services offered by the depository, the

investor has to open an account with a DP. This is similar to opening an account with any

branch of a bank in order to utilize the bank's services.

The Depository facilities include,


Dematerialization, Dematerialization, repurchase/redemption of units of mutual

funds, electronic settlement of trades in stock exchanges, receipt of non-cash corporate

benefits such as bonus, in electronic form, transmission of securities, and other facilities

like holding debt instruments in the same account, availing stock lending/borrowing

facility , etc. Sharewealth provides you all Depository services.

D. Commodities

Any product that can be used for commerce or an article of commerce which is

traded on an authorized commodity exchange is known as commodity. The article should

be movable of value, something which is bought or sold and which is produced or used as

the subject or barter or sale. In short commodity includes all kinds of goods. Forward

Contracts (Regulation) Act (FCRA), 1952 defines goods as every kind of movable

property other than actionable claims, money and securities.

In current situation, all goods and products of agricultural (including plantation),

mineral and fossil origin are allowed for commodity trading recognized under the FCRA.

The national commodity exchanges, recognized by the Central Government, permits

commodities which include precious (gold and silver) and non-ferrous metals; cereals

and pulses; ginned and un-ginned cotton; oilseeds, oils and oilcakes; raw jute and jute

goods; sugar and gur; potatoes and onions; coffee and tea; rubber and spices. Etc.

Sharewealth is the registered member of MCX.

E. Mutual Fund

Mutual fund is a mechanism for pooling the resources by issuing units to the

investors and investing funds in securities in accordance with objectives as disclosed in

offer document.

Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all stocks

may not move in the same direction in the same proportion at the same time. Mutual fund

issues units to the investors in accordance with quantum of money invested by them.

Investors of mutual funds are known as unitholders.


The profits or losses are shared by the investors in proportion to their investments.

The mutual funds normally come out with a number of schemes with different investment

objectives which are launched from time to time. A mutual fund is required to be

registered with Securities and Exchange Board of India (SEBI) which regulates securities

markets before it can collect funds from the public Sharewealth has the AMFI

registration and guides in all types of Mutual Fund.

F. IPO

An Initial Public Offer (IPO) is the selling of securities to the public in the

primary market. It is when an unlisted company makes either a fresh issue of securities or

an offer for sale of its existing securities or both for the first time to the public. This

paves way for listing and trading of the issuers securities. The sale of securities can be

either through book building or through normal public issue.

IPOs can be a risky investment. For the individual investor, it is tough to predict

what the stock will do on its initial day of trading and in the near future since there is

often little historical data with which to analyze the company. Also, most IPOs are of

companies going through a transitory growth period, and they are therefore subject to

additional uncertainty regarding their future value.

4.5. Area of Operation

Sharewealth Securities is a Full Service Broker. Membership:

NSE, SEBI Registration No: NSE INB/INF/INE 231249930

BSE, SEBI Registration No: INB 011249936

MCX-SX, SEBI Registration No: INE 261249930

MCX FMC Registration No: MCX/TCM/CORP/1054

NCDEX FMC Registration No: NCDEX/TM/CORP/935

NMCE FMC Registration No: NMCE/TCM/CORP/0295

ICEX FMC Registration No: ICEX/TCM/CORP/0019

AMFI Registration No: ARN – 77624

Depository Participant: CDSL: IN-DP-CDSL-379-2006

DP ID: 12047600


4.6. Current Status

Sharewealth Securities Ltd has two group companies, Sharewealth Commodities

Pvt Ltd (Member: MCX, NCDEX, NMCE, ICEX & NSEL) and Sharewealth Financial

Services Ltd (AMFI Registered Mutual Fund Distributor). Sharewealth has a group

(Overseas Joint Venture) company at Abu Dhabi, Sharewealth Financial Consultancy

LLC. Registered & Corporate offices of Sharewealth Group of companies are at Trissur.

4.9. SWOT Analysis

Strengths

1. It is a leading online trading firm with more than 520 peoples working in the

organization.

2. Sharewealth make avail multichannel operation to all its customers through an online

system with www.sharewealthindia.com , 165 share shops in Kerala and a call center

based Dial-n-Trade facility

3. Sharewealth has dedicated and well-designed research department for fundamental and

technical research as well. Research department regularly tackle with the pulse of the

market and provide investment advices to its client at free cost on timely basis. They have

a well strike rate of 70-80%.

4. Innovative range of financial products

5. Known for transparent functioning

6. Emphasis on building stronger bond with customers

7. Services offered include Equity Trading, Commodities, Mutual Funds, IPO, and

Depository Services.

Weaknesses

1. Lack of country wide expansion due to insufficiency of investment and so it has a

localized presence almost.

2. Lack of aggressive marketing promotional strategies like visual media, print media etc.

3. Lack of well awareness among customers.

4. Lack of programs for emphasizing on customer retention.

http://www.sharewealthindia.com/


5. Rather than concentrating on retail investors, it gives more focus on HNIs.

6. Less market share as compared with major competitors.

Opportunities

1. Country has featured with high boom in capital market and so it can raise its customer

base by launching new services across.

2. It can explore new promotional media like print media and electronic media to tap small

investors easily.

3. Recently, more small investors stepping stone in to stock market because of the poor

return from the traditional investment modes like banks and post office.

4. Government has declared abolition of long term capital gain tax on shares and reduction

in short term capital gain. It makes stock market investment as better tax shelter.

5. Miraculous popularity of internet in the country makes stock market dealings easier to

any category of people from any part of the country.

6. High purchasing power and people looking to more investment opportunities

7. Growing rural market

8. Investment advisory services, Portfolio management services and Investment banking

services

Threats

1. Rival firms are coming out with aggressive marketing promotional strategies and it may

hamper acceptance of bran by new clients.

2. Rival players in the market are providing margin funds to investors on easy terms and

conditions, rather than Sharewealth provides.

3. Recently more players have been stepping into this domain which is quite enough to

destroy earnings of Sharewealth further.

4. Stringent Economic measures by Government and RBI

5. Entry of foreign finance firms in Indian Market


5. Data Analysis

I. Stock Split

To analyze the impact of stock split announcement on selected companies the

abnormal returns of beta adjusted share prices of companies having stock split

announcement were found for each day in the event window .

There are five selected stock split announcements companies samples (Recent 5

Companies) are considered for the analysis in the sample companies during the study

period. The abnormal returns of each company on each day are found out and it is

cumulated to get CAR. This part focuses on the effect of dividend information release by

testing the significance of difference in returns between the period before and after the

Dividend announcement

1. Bank of Baroda

Calculation AR, CAR and t Test for each day

Before After

Period AR CAR t Test Period AR CAR t Test

-30 0.0162 0.0162 1.1371 1 -0.0165 -0.0165 -1.1530

-29 0.0124 0.0286 0.8658 2 -0.0132 -0.0296 -0.9240

-28 0.0012 0.0298 0.0856 3 0.0036 -0.0261 0.2513

-27 -0.0011 0.0287 -0.0802 4 -0.0332 -0.0593 -2.3267

-26 -0.0148 0.0139 -1.0354 5 -0.0985 -0.1578 -6.9007

-25 0.0047 0.0186 0.3278 6 -0.0276 -0.1853 -1.9319

-24 0.0193 0.0379 1.3554 7 -0.0072 -0.1926 -0.5069

-23 -0.0237 0.0142 -1.6613 8 0.0050 -0.1876 0.3490

-22 -0.0031 0.0111 -0.2183 9 -0.0323 -0.2199 -2.2650

-21 0.0128 0.0239 0.8950 10 -0.0059 -0.2258 -0.4103

-20 0.0131 0.0369 0.9171 11 0.0088 -0.2169 0.6198

-19 0.0054 0.0423 0.3768 12 0.0123 -0.2046 0.8621

-18 -0.0092 0.0332 -0.6411 13 0.0070 -0.1976 0.4907

-17 0.0104 0.0436 0.7311 14 -0.0125 -0.2101 -0.8741

-16 -0.0046 0.0390 -0.3218 15 -0.0033 -0.2134 -0.2344

-15 -0.0032 0.0358 -0.2236 16 -0.0007 -0.2141 -0.0467


-14 -0.0081 0.0277 -0.5686 17 -0.0066 -0.2207 -0.4631

-13 0.0037 0.0314 0.2621 18 -0.0300 -0.2508 -2.1051

-12 0.0103 0.0418 0.7229 19 0.0359 -0.2148 2.5183

-11 0.0097 0.0515 0.6813 20 0.0088 -0.2060 0.6155

-10 -0.0121 0.0394 -0.8465 21 -0.0307 -0.2367 -2.1516

-9 -0.0244 0.0150 -1.7087 22 -0.0013 -0.2380 -0.0876

-8 0.0112 0.0262 0.7839 23 -0.0148 -0.2528 -1.0356

-7 0.0067 0.0329 0.4688 24 0.0217 -0.2311 1.5211

-6 -0.0038 0.0291 -0.2648 25 0.0148 -0.2163 1.0336

-5 -0.0147 0.0145 -1.0269 26 -0.0247 -0.2410 -1.7313

-4 -0.0201 -0.0056 -1.4085 27 0.0205 -0.2205 1.4372

-3 -0.0042 -0.0098 -0.2931 28 -0.0273 -0.2478 -1.9111

-2 -0.0181 -0.0279 -1.2664 29 0.0173 -0.2305 1.2131

-1 0.0330 0.0051 2.3088 30 0.0067 -0.2238 0.4691

Positive AR is seen for 16 days before the split announcement and 12 days after

the announcement it shows that stock is giving abnormal return before the announcement

more than after the announcement window.

The above table reveals that AR shows significant increase only on the -12th

days

and +19th

days split information and hence it can be concluded that abnormal returns

cannot be earned on release split announcement.

Hypothesis testing



H0 is accepted and H1 rejected

Parametric Test (t- test)

To test the statistical significance between ARs of the pre and post-split

announcement period t-test is applied and the result is provided in the table

Abnormal Return

Before After

Mean 0.0002 -0.007

t Test 0.3542 -0.1542


The mean value of AR for 30 days before the announcement is 0.0002 and that for

30 days after the announcement is -0.007. To test the significance of difference t test (5%

level of significance) is applied and from the result of the above analysis it is clear that

the split information will not influence share price of the companies in a significant

manner.

Graph showing CAR before and after Announcement

Above graph showing CAR in before announcement is positive and Negative

after announcement it reveals that there is positive abnormal return before announcement

window.

-0.3000

-0.2500

-0.2000

-0.1500

-0.1000

-0.0500

0.0000

0.0500

0.1000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


2. Tech Mahindra Ltd


Before After


-30 -0.0204 -0.0204 -1.5170 1 -0.0080 -0.0080 -0.5932

-29 0.0087 -0.0117 0.6481 2 -0.0308 -0.0388 -2.2922

-28 -0.0032 -0.0149 -0.2372 3 0.0041 -0.0347 0.3060

-27 -0.0082 -0.0230 -0.6072 4 -0.0044 -0.0391 -0.3262

-26 -0.0240 -0.0470 -1.7860 5 -0.0011 -0.0402 -0.0814

-25 0.0261 -0.0210 1.9379 6 -0.0076 -0.0478 -0.5676

-24 0.0183 -0.0027 1.3616 7 -0.0378 -0.0855 -2.8084

-23 -0.0083 -0.0110 -0.6162 8 0.0060 -0.0796 0.4434

-22 0.0028 -0.0082 0.2095 9 0.0019 -0.0777 0.1417

-21 -0.0043 -0.0125 -0.3210 10 0.0125 -0.0652 0.9269

-20 -0.0226 -0.0351 -1.6831 11 0.0145 -0.0507 1.0821

-19 -0.0063 -0.0414 -0.4655 12 0.0276 -0.0231 2.0507

-18 -0.0063 -0.0476 -0.4662 13 -0.0050 -0.0281 -0.3740

-17 0.0034 -0.0442 0.2565 14 -0.0126 -0.0407 -0.9372

-16 -0.0097 -0.0539 -0.7204 15 0.0013 -0.0394 0.0988

-15 -0.0032 -0.0571 -0.2417 16 -0.0058 -0.0452 -0.4295

-14 0.0253 -0.0318 1.8835 17 -0.0037 -0.0489 -0.2771

-13 0.0083 -0.0235 0.6190 18 -0.0179 -0.0668 -1.3314

-12 -0.0042 -0.0277 -0.3118 19 -0.0072 -0.0740 -0.5365

-11 0.0148 -0.0129 1.0972 20 0.0093 -0.0647 0.6944

-10 -0.0062 -0.0191 -0.4595 21 -0.0128 -0.0774 -0.9493

-9 -0.0021 -0.0212 -0.1580 22 -0.0214 -0.0988 -1.5883

-8 -0.0181 -0.0393 -1.3481 23 -0.0494 -0.1482 -3.6730

-7 0.0131 -0.0262 0.9770 24 0.0113 -0.1369 0.8403

-6 0.0280 0.0018 2.0827 25 0.0316 -0.1052 2.3527

-5 -0.0248 -0.0230 -1.8419 26 0.0148 -0.0905 1.1001

-4 -0.0081 -0.0310 -0.5995 27 0.0125 -0.0780 0.9269

-3 0.0029 -0.0281 0.2185 28 -0.0230 -0.1010 -1.7113

-2 0.0116 -0.0164 0.8656 29 -0.0061 -0.1071 -0.4522

-1 -0.0232 -0.0397 -1.7291 30 0.0096 -0.0974 0.7168


Above table shows that Positive AR is seen for 13 days before the split

announcement and 12 days after the announcement it shows that stock is giving abnormal

return before the announcement more than after the announcement window.


, -14th

, -6th

days and +12th

, +25 days split information and hence it can be concluded that

abnormal returns can be earned on release split announcement in both before and after

window.

Hypothesis testing







AR

Before After

Mean -0.0013 -0.0032

t Test -2.9524 -7.2476


30 days after the announcement is -0.007. To test the significance of difference t test (5%


the split information will not influence share price of the companies in a significant

manner.



Above graph showing CAR in before and after announcement is Negative; it

reveals that there is no positive abnormal return before announcement window.

-0.1600

-0.1400

-0.1200

-0.1000

-0.0800

-0.0600

-0.0400

-0.0200

0.0000

0.0200

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


3. Cadila Healthcare Ltd


Before After


-30 -0.0253 -0.0253 -1.32 1 0.0021 0.0021 0.11

-29 0.0120 -0.0134 0.62 2 0.0375 0.0375 1.96

-28 -0.0175 -0.0308 -0.91 3 0.0004 0.0004 0.02

-27 -0.0177 -0.0486 -0.93 4 0.0043 0.0043 0.23

-26 0.0120 -0.0366 0.63 5 -0.0295 -0.0295 -1.54

-25 0.0234 -0.0132 1.22 6 -0.0049 -0.0049 -0.25

-24 0.0085 -0.0047 0.44 7 -0.0008 -0.0008 -0.04

-23 -0.0111 -0.0158 -0.58 8 0.0007 0.0007 0.04

-22 0.0027 -0.0131 0.14 9 -0.0305 -0.0305 -1.59

-21 -0.0121 -0.0252 -0.63 10 -0.0039 -0.0039 -0.20

-20 0.0007 -0.0245 0.04 11 0.0029 0.0029 0.15

-19 -0.0117 -0.0362 -0.61 12 -0.0283 -0.0283 -1.48

-18 -0.0038 -0.0400 -0.20 13 0.0393 0.0393 2.05

-17 -0.0152 -0.0552 -0.80 14 0.0068 0.0068 0.35

-16 -0.0037 -0.0590 -0.20 15 0.0013 0.0013 0.07

-15 -0.0001 -0.0591 -0.01 16 0.0243 0.0243 1.27

-14 -0.0044 -0.0635 -0.23 17 0.0056 0.0056 0.29

-13 0.0021 -0.0614 0.11 18 0.0132 0.0132 0.69

-12 -0.0013 -0.0627 -0.07 19 -0.0279 -0.0279 -1.46

-11 0.0610 -0.0017 3.19 20 -0.0192 -0.0192 -1.00

-10 -0.0022 -0.0039 -0.11 21 0.0110 0.0110 0.57

-9 0.0368 0.0329 1.92 22 0.0438 0.0438 2.29

-8 -0.0159 0.0170 -0.83 23 -0.0103 -0.0103 -0.54

-7 0.0381 0.0551 1.99 24 0.0249 0.0249 1.30

-6 0.0094 0.0645 0.49 25 -0.0211 -0.0211 -1.10

-5 0.0188 0.0833 0.98 26 0.0163 0.0163 0.85

-4 -0.0059 0.0774 -0.31 27 0.0364 0.0364 1.90

-3 0.0066 0.0840 0.35 28 -0.0417 -0.0417 -2.18

-2 0.0034 0.0874 0.18 29 0.0197 0.0197 1.03

-1 -0.0220 0.0654 -1.15 30 -0.0183 -0.0183 -0.96



the announcement it shows that stock is giving abnormal return after the announcement

more than before the announcement window


, -9th

,

-7th

days and +2nd

, 13th, 22nd, 27th

days split information and hence it can be concluded

that abnormal returns can be earned on release split announcement.

Hypothesis testing







AR

Before After

Mean 0.00449 0.00181

t Test 7.03691 2.83079


30 days after the announcement is -0.0018. To test the significance of difference t test

(5% level of significance) is applied and from the result of the above analysis it is clear

that the split information will influence share price of the companies in a significant

manner in both before and after window.


Graph showing CAR before and After Announcement

Above graphs are showing CAR in before is positive and after announcement is

negative it reveals that there is positive abnormal return in before announcement window.

-0.0800

-0.0600

-0.0400

-0.0200

0.0000

0.0200

0.0400

0.0600

0.0800

0.1000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


II. Bonus

To analyze the impact of bonus announcement on selected companies the

abnormal returns of beta adjusted share prices of companies having dividend


There are five selected bonus announcements companies samples (Recent 5





Dividend announcement.

1. Aurobindo Pharma Ltd.


Before After


-30 0.0052 0.0052 -0.4402 1 -0.0130 -0.0130 -0.5601

-29 -0.0029 0.0023 -0.0852 2 -0.0168 -0.0298 -0.7212

-28 -0.0103 -0.0081 0.5283 3 -0.0006 -0.0304 -0.0268

-27 0.0083 0.0002 -0.8282 4 -0.0009 -0.0313 -0.0368

-26 0.0053 0.0055 0.0801 5 0.0394 0.0081 1.6914

-25 -0.0075 -0.0020 0.1626 6 -0.0138 -0.0057 -0.5935

-24 0.0213 0.0193 0.1618 7 0.0002 -0.0055 0.0086

-23 0.0056 0.0250 0.2649 8 -0.0208 -0.0263 -0.8929

-22 -0.0118 0.0131 0.4304 9 0.0241 -0.0022 1.0357

-21 -0.0029 0.0102 0.3113 10 -0.0081 -0.0103 -0.3478

-20 -0.0190 -0.0088 0.6403 11 0.0007 -0.0096 0.0309

-19 0.0121 0.0033 0.1465 12 0.0009 -0.0086 0.0392

-18 0.0397 0.0430 -0.1608 13 0.0254 0.0167 1.0883

-17 -0.0158 0.0273 0.2355 14 -0.0144 0.0023 -0.6162

-16 0.0025 0.0298 -0.0971 15 0.0153 0.0177 0.6575

-15 -0.0081 0.0217 -0.3522 16 -0.0066 0.0111 -0.2836

-14 0.0235 0.0452 0.2826 17 0.0052 0.0163 0.2232

-13 -0.0091 0.0361 0.4446 18 -0.0116 0.0046 -0.4993


-12 -0.0336 0.0024 -0.0116 19 -0.0040 0.0006 -0.1730

-11 -0.0048 -0.0024 0.1756 20 0.0355 0.0361 1.5228

-10 0.0112 0.0088 0.2172 21 0.0096 0.0457 0.4132

-9 0.0002 0.0091 -0.0053 22 0.0273 0.0730 1.1736

-8 0.0288 0.0379 -0.7331 23 0.0018 0.0748 0.0773

-7 0.0110 0.0489 -0.1518 24 0.0246 0.0994 1.0545

-6 -0.0049 0.0440 0.1371 25 -0.0023 0.0971 -0.1006

-5 0.0067 0.0507 0.5092 26 0.0128 0.1098 0.5486

-4 0.0115 0.0623 -0.0324 27 -0.0007 0.1092 -0.0281

-3 -0.0165 0.0458 0.3208 28 -0.0107 0.0985 -0.4578

-2 -0.0107 0.0351 0.4158 29 0.0049 0.1035 0.2124

-1 0.0010 0.0362 0.0363 30 0.0050 0.1085 0.2145

Positive AR is seen for 17 days before the bonus announcement and 14 days after


more than after the announcement date.

The above table reveals that AR shows significant there is no increase hence it

can be concluded that abnormal returns cannot be earned on release bonus

announcement.

Hypothesis testing




Parametric Test (t-test)

To test the statistical significance of increase in AR due to bonus information t-

test is applied and the result is shown in the table

AR

Before After

Mean 0.0012 0.00361

t Test 1.5533 4.6540

The average abnormal return of 30 days before the announcement of the bonus is

0.0012 which increased to 0.0036 after the announcement. To find whether this


difference in abnormal return is significant or not, t-test is conducted. The test result

indicates that the difference in price before is not significant and after the bonus

announcement is significant, thus confirms that investor can earn abnormal return after

bonus information. So it is evident that bonus information has no significant impact on

price of shares after event window.


Above graph showing CAR in before and after announcement is positive it

reveals that there is positive abnormal return both announcement window.

-0.0400

-0.0200

0.0000

0.0200

0.0400

0.0600

0.0800

0.1000

0.1200

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Before

After


2. Federal Bank Ltd.


Before After


-30 0.0214 0.0214 1.3223 1 0.0113 0.0113 0.6982

-29 -0.0048 0.0166 -0.2966 2 -0.0056 0.0057 -0.3446

-28 -0.0168 -0.0002 -1.0358 3 0.0146 0.0203 0.8991

-27 0.0009 0.0007 0.0525 4 -0.0047 0.0156 -0.2929

-26 0.0033 0.0039 0.2013 5 -0.0151 0.0004 -0.9339

-25 0.0105 0.0144 0.6465 6 -0.0240 -0.0236 -1.4790

-24 -0.0129 0.0015 -0.7952 7 -0.0123 -0.0358 -0.7573

-23 -0.0040 -0.0024 -0.2440 8 -0.0694 -0.1052 -4.2832

-22 -0.0031 -0.0055 -0.1890 9 -0.0002 -0.1054 -0.0120

-21 0.0231 0.0176 1.4263 10 -0.0058 -0.1112 -0.3565

-20 -0.0135 0.0041 -0.8337 11 -0.0019 -0.1131 -0.1168

-19 -0.0040 0.0001 -0.2481 12 0.0083 -0.1048 0.5108

-18 -0.0051 -0.0050 -0.3175 13 0.0043 -0.1006 0.2631

-17 0.0014 -0.0037 0.0842 14 0.0082 -0.0923 0.5089

-16 0.0129 0.0092 0.7954 15 -0.0086 -0.1009 -0.5318

-15 0.0342 0.0434 2.1072 16 -0.0091 -0.1100 -0.5617

-14 -0.0159 0.0275 -0.9806 17 -0.0256 -0.1357 -1.5801

-13 -0.0033 0.0242 -0.2044 18 -0.0062 -0.1419 -0.3849

-12 -0.0059 0.0183 -0.3643 19 0.0010 -0.1409 0.0620

-11 -0.0130 0.0053 -0.7998 20 0.0044 -0.1365 0.2692

-10 -0.0013 0.0040 -0.0825 21 -0.0143 -0.1509 -0.8849

-9 0.0481 0.0520 2.9646 22 0.0060 -0.1449 0.3684

-8 -0.0101 0.0419 -0.6240 23 -0.0050 -0.1499 -0.3097

-7 0.0103 0.0522 0.6350 24 0.0132 -0.1367 0.8168

-6 -0.0058 0.0464 -0.3550 25 -0.0131 -0.1498 -0.8085

-5 0.0009 0.0474 0.0571 26 -0.0098 -0.1596 -0.6052

-4 0.0254 0.0727 1.5658 27 0.0122 -0.1474 0.7502

-3 0.0039 0.0767 0.2416 28 0.0125 -0.1350 0.7687

-2 -0.0023 0.0744 -0.1398 29 -0.0036 -0.1386 -0.2213

-1 -0.0147 0.0597 -0.9065 30 -0.0071 -0.1456 -0.4356






and -

19th

day’s bonus information and hence it can be concluded that abnormal returns cannot

be earned on release bonus announcement.

Hypothesis testing





To test the statistical significance between ARs of the pre and post-bonus


AR

Before After

Mean 0.00199 -0.00485

t Test 3.68294 -8.9843




that the split information will influence share price of the companies in a significant

manner in pre announcement window.





window.

-0.2000

-0.1500

-0.1000

-0.0500

0.0000

0.0500

0.1000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


3. Kotak Mahindra Bank Ltd.


Before After


-30 -0.0001 -0.0001 -0.01 1 0.0013 0.0013 0.08

-29 -0.0027 -0.0028 -0.17 2 0.0024 0.0037 0.15

-28 0.0077 0.0049 0.50 3 -0.0039 -0.0002 -0.25

-27 -0.0031 0.0018 -0.20 4 -0.0060 -0.0063 -0.39

-26 0.0000 0.0018 0.00 5 -0.0046 -0.0108 -0.30

-25 0.0048 0.0066 0.31 6 0.0298 0.0190 1.92

-24 0.0146 0.0212 0.94 7 -0.0117 0.0073 -0.75

-23 -0.0042 0.0170 -0.27 8 0.0051 0.0124 0.33

-22 0.0090 0.0260 0.58 9 -0.0131 -0.0007 -0.84

-21 -0.0156 0.0104 -1.00 10 -0.0005 -0.0013 -0.03

-20 -0.0095 0.0009 -0.61 11 -0.0063 -0.0076 -0.41

-19 -0.0204 -0.0195 -1.31 12 0.0119 0.0044 0.77

-18 0.0177 -0.0018 1.14 13 0.0073 0.0117 0.47

-17 -0.0169 -0.0187 -1.09 14 0.0217 0.0334 1.40

-16 -0.0032 -0.0219 -0.21 15 -0.0086 0.0248 -0.55

-15 -0.0037 -0.0257 -0.24 16 -0.0199 0.0049 -1.28

-14 -0.0018 -0.0274 -0.11 17 -0.0415 -0.0367 -2.67

-13 0.0060 -0.0215 0.38 18 -0.0094 -0.0461 -0.61

-12 0.0080 -0.0135 0.51 19 0.0031 -0.0430 0.20

-11 0.0139 0.0004 0.90 20 -0.0056 -0.0486 -0.36

-10 0.0046 0.0051 0.30 21 0.0169 -0.0317 1.09

-9 0.0101 0.0152 0.65 22 -0.0002 -0.0319 -0.01

-8 -0.0132 0.0020 -0.85 23 0.0084 -0.0235 0.54

-7 0.0016 0.0036 0.10 24 0.0026 -0.0209 0.16

-6 0.0035 0.0070 0.22 25 -0.0096 -0.0305 -0.62

-5 0.0046 0.0117 0.30 26 0.0079 -0.0226 0.51

-4 0.0186 0.0303 1.20 27 0.0166 -0.0060 1.07

-3 -0.0102 0.0201 -0.66 28 0.0060 0.0000 0.39

-2 0.0052 0.0252 0.33 29 -0.0209 -0.0209 -1.35

-1 -0.0122 0.0130 -0.79 30 0.0065 -0.0144 0.42





The above table reveals that AR shows significant increase only on the 6th

day

Bonus information and hence it can be concluded that abnormal returns cannot be earned

on release Bonus announcement.

Hypothesis testing





To test the statistical significance between ARs of the pre and post-bonus


AR

Before After

Mean 0.0004 -0.0005

t Test 0.8365 -0.9272




that the split information will not influence share price of the companies in a significant

manner.



Above graphs are showing CAR in before announcement is positive and Negative


window.

-0.0600

-0.0500

-0.0400

-0.0300

-0.0200

-0.0100

0.0000

0.0100

0.0200

0.0300

0.0400

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


4. Divi's Laboratories Ltd


Before After


-30 0.0419 0.0419 3.1782 1 0.0049 0.0049 0.3709

-29 0.0269 0.0688 2.0371 2 -0.0068 -0.0019 -0.5124

-28 0.0004 0.0692 0.0291 3 -0.0108 -0.0126 -0.8163

-27 -0.0119 0.0573 -0.9013 4 0.0058 -0.0069 0.4373

-26 0.0138 0.0711 1.0450 5 0.0086 0.0018 0.6549

-25 0.0341 0.1052 2.5857 6 -0.0020 -0.0002 -0.1497

-24 0.0519 0.1571 3.9322 7 -0.0049 -0.0051 -0.3687

-23 0.0052 0.1623 0.3916 8 -0.0014 -0.0064 -0.1029

-22 0.0222 0.1845 1.6823 9 -0.0373 -0.0437 -2.8244

-21 -0.0510 0.1335 -3.8656 10 0.0022 -0.0415 0.1637

-20 -0.0358 0.0977 -2.7135 11 0.0033 -0.0382 0.2513

-19 0.0020 0.0997 0.1547 12 0.0002 -0.0381 0.0121

-18 0.0155 0.1152 1.1708 13 -0.0217 -0.0598 -1.6437

-17 0.0089 0.1241 0.6780 14 -0.0099 -0.0697 -0.7535

-16 0.0555 0.1796 4.2054 15 -0.0008 -0.0705 -0.0604

-15 -0.0181 0.1615 -1.3751 16 0.0294 -0.0411 2.2250

-14 -0.0111 0.1504 -0.8397 17 -0.0197 -0.0609 -1.4959

-13 -0.0116 0.1388 -0.8805 18 0.0047 -0.0562 0.3538

-12 -0.0188 0.1200 -1.4255 19 -0.0034 -0.0596 -0.2568

-11 -0.0300 0.0899 -2.2759 20 0.0112 -0.0484 0.8500

-10 -0.0043 0.0856 -0.3239 21 0.0049 -0.0435 0.3694

-9 -0.0256 0.0600 -1.9406 22 0.0128 -0.0307 0.9681

-8 0.0422 0.1023 3.2003 23 0.0156 -0.0151 1.1855

-7 -0.0034 0.0988 -0.2590 24 0.0303 0.0152 2.2974

-6 0.0093 0.1082 0.7049 25 0.0054 0.0206 0.4091

-5 0.0052 0.1133 0.3905 26 0.0286 0.0492 2.1639

-4 0.0053 0.1186 0.3988 27 -0.0086 0.0406 -0.6525

-3 0.0037 0.1223 0.2824 28 -0.0119 0.0287 -0.8997


-2 -0.0004 0.1219 -0.0270 29 -0.0278 0.0009 -2.1099

-1 0.0036 0.1255 0.2735 30 0.0139 0.0147 1.0510



more than after the announcement window.


, -29th

-25 -24 -16 -8 days and +16th

+24th

+26th

days split information and hence it can be

concluded that abnormal returns can be earned on release bonus announcement.

Hypothesis testing





To test the statistical significance between ARs of the pre and post- bonus


AR

Before After

Mean 0.00418 0.00049

t Test 9.51267 1.11672


30 days after the announcement is 0.0005. To test the significance of difference t test (5%


the split information will influence share price of the companies in a significant manner.



Above graph showing CAR in before and after announcement is positive

announcement it reveals that there is positive abnormal return in both announcement

window.

-0.1000

-0.0500

0.0000

0.0500

0.1000

0.1500

0.2000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR Before


5. Colgate-Palmolive (India) Ltd


Before After


-30 -0.0083 -0.0083 -0.73 1 0.0138 0.0138 1.23

-29 -0.0051 -0.0134 -0.46 2 -0.0005 0.0133 -0.05

-28 0.0021 -0.0113 0.19 3 -0.0082 0.0051 -0.72

-27 -0.0115 -0.0228 -1.02 4 0.0138 0.0189 1.23

-26 -0.0003 -0.0231 -0.03 5 0.0032 0.0221 0.29

-25 0.0028 -0.0203 0.25 6 -0.0086 0.0136 -0.76

-24 0.0034 -0.0169 0.30 7 -0.0056 0.0080 -0.50

-23 0.0047 -0.0122 0.42 8 -0.0168 -0.0088 -1.49

-22 0.0044 -0.0078 0.39 9 -0.0139 -0.0227 -1.23

-21 -0.0079 -0.0158 -0.71 10 0.0016 -0.0211 0.14

-20 -0.0199 -0.0357 -1.77 11 -0.0130 -0.0340 -1.15

-19 0.0100 -0.0257 0.89 12 0.0007 -0.0333 0.06

-18 0.0056 -0.0201 0.49 13 -0.0084 -0.0418 -0.75

-17 -0.0013 -0.0214 -0.11 14 -0.0062 -0.0479 -0.55

-16 0.0057 -0.0157 0.51 15 -0.0049 -0.0529 -0.44

-15 -0.0071 -0.0229 -0.63 16 0.0346 -0.0182 3.08

-14 0.0065 -0.0164 0.57 17 0.0009 -0.0174 0.08

-13 -0.0131 -0.0295 -1.16 18 0.0061 -0.0113 0.54

-12 -0.0067 -0.0361 -0.59 19 -0.0049 -0.0162 -0.43

-11 -0.0151 -0.0512 -1.34 20 -0.0046 -0.0207 -0.40

-10 -0.0268 -0.0781 -2.38 21 0.0131 -0.0076 1.16

-9 0.0082 -0.0699 0.73 22 0.0348 0.0272 3.09

-8 -0.0110 -0.0808 -0.98 23 -0.0015 0.0258 -0.13

-7 0.0229 -0.0579 2.04 24 -0.0164 0.0093 -1.46

-6 0.0339 -0.0241 3.01 25 -0.0177 -0.0084 -1.57

-5 0.0113 -0.0127 1.00 26 0.0102 0.0018 0.90

-4 0.0154 0.0027 1.37 27 -0.0081 -0.0063 -0.72

-3 -0.0218 -0.0191 -1.93 28 0.0021 -0.0042 0.19

-2 0.0094 -0.0097 0.84 29 0.0000 -0.0042 0.00

-1 -0.0133 -0.0230 -1.18 30 0.0230 0.0189 2.05






-6th

days and +22nd

30th

days split information and hence it can be concluded that abnormal

returns cannot be earned on release split announcement.

Hypothesis testing







AR

Before After

Mean -0.0008 0.00063

t Test -2.0381 0.01126

The mean value of AR for 30 days before the announcement is -0.0008 and that

for 30 days after the announcement is 0.0006. To test the significance of difference t test



manner.



Above graphs are showing CAR in before and after announcement is positive it

reveals that there is positive abnormal return before announcement window

-0.1000

-0.0800

-0.0600

-0.0400

-0.0200

0.0000

0.0200

0.0400

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


III. Dividend

To analyze the impact of Dividend announcement on selected companies the

abnormal returns of beta adjusted share prices of companies having dividend


There are five selected Dividend announcements companies samples (Recent 5





Dividend announcement.

1. Grasim Industries Ltd.


Before After


-30 -0.0046 -0.0046 -0.47 1 0.0071 0.0071 0.72

-29 0.0014 -0.0032 0.14 2 0.0169 0.0241 1.71

-28 0.0176 0.0144 1.77 3 -0.0015 0.0226 -0.15

-27 0.0042 0.0185 0.42 4 0.0053 0.0279 0.53

-26 -0.0091 0.0094 -0.92 5 -0.0091 0.0188 -0.92

-25 0.0099 0.0193 1.00 6 -0.0024 0.0164 -0.24

-24 -0.0149 0.0044 -1.50 7 -0.0067 0.0097 -0.67

-23 0.0079 0.0123 0.79 8 0.0007 0.0104 0.07

-22 0.0040 0.0162 0.40 9 -0.0012 0.0092 -0.12

-21 -0.0066 0.0096 -0.67 10 -0.0067 0.0025 -0.67

-20 -0.0042 0.0055 -0.42 11 -0.0094 -0.0069 -0.95

-19 0.0173 0.0228 1.74 12 0.0114 0.0045 1.15

-18 -0.0060 0.0168 -0.60 13 0.0008 0.0053 0.08

-17 -0.0053 0.0115 -0.53 14 -0.0064 -0.0011 -0.64

-16 -0.0029 0.0086 -0.29 15 0.0125 0.0114 1.26

-15 -0.0123 -0.0037 -1.24 16 -0.0074 0.0041 -0.74

-14 0.0066 0.0029 0.66 17 0.0017 0.0058 0.17

-13 -0.0029 0.0000 -0.29 18 0.0087 0.0145 0.87


-12 0.0072 0.0073 0.73 19 0.0032 0.0177 0.32

-11 0.0025 0.0097 0.25 20 -0.0092 0.0085 -0.92

-10 0.0017 0.0114 0.17 21 0.0106 0.0192 1.07

-9 -0.0066 0.0048 -0.66 22 0.0091 0.0283 0.92

-8 0.0169 0.0217 1.70 23 -0.0060 0.0223 -0.60

-7 -0.0134 0.0083 -1.35 24 -0.0023 0.0200 -0.23

-6 0.0036 0.0118 0.36 25 0.0074 0.0274 0.74

-5 0.0001 0.0120 0.02 26 -0.0016 0.0258 -0.16

-4 -0.0179 -0.0059 -1.80 27 -0.0067 0.0191 -0.67

-3 -0.0008 -0.0068 -0.08 28 -0.0060 0.0131 -0.60

-2 0.0180 0.0113 1.82 29 -0.0157 -0.0026 -1.59

-1 0.0085 0.0198 0.86 30 0.0030 0.0004 0.31

Positive AR is seen for 16 days before the Dividend announcement and 13 days

after the announcement it shows that stock is giving abnormal return before the

announcement more than after the announcement date.


-19th

-8th

-2nd

days and +2 days Dividend information and hence it can be concluded that

abnormal returns can be earned more on before release announcement.

Hypothesis testing





To test the statistical significance between ARs of the pre and post announcement

period t-test is applied and the result is provided in the table

AR

Before After

Mean 0.00066 0.0000

t Test 1.9916 0.0447





the split information will influence before window not influence share price of the

companies in a significant manner.




window.

-0.0100

0.0000

0.0100

0.0200

0.0300

0.0400

0.0500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR After

CAR Befor


2. Bharat Petroleum Corporation Ltd.


Before After


-30 0.0030 0.0030 0.1750 1 0.0302 0.0302 1.7456

-29 0.0247 0.0277 1.4277 2 0.0053 0.0355 0.3060

-28 0.0004 0.0282 0.0256 3 -0.0039 0.0316 -0.2279

-27 0.0062 0.0344 0.3602 4 -0.0304 0.0011 -1.7579

-26 0.0033 0.0377 0.1888 5 0.0427 0.0438 2.4680

-25 0.0054 0.0431 0.3129 6 -0.0067 0.0371 -0.3893

-24 0.0126 0.0557 0.7268 7 -0.0298 0.0074 -1.7197

-23 -0.0070 0.0487 -0.4039 8 -0.0228 -0.0154 -1.3156

-22 -0.0009 0.0477 -0.0539 9 0.0245 0.0091 1.4156

-21 -0.0114 0.0363 -0.6611 10 0.0134 0.0225 0.7746

-20 -0.0381 -0.0018 -2.2047 11 0.0217 0.0442 1.2532

-19 -0.0199 -0.0217 -1.1486 12 0.0062 0.0503 0.3564

-18 0.0286 0.0069 1.6547 13 -0.0289 0.0215 -1.6692

-17 -0.0119 -0.0050 -0.6887 14 -0.0043 0.0172 -0.2481

-16 0.0043 -0.0007 0.2467 15 0.0010 0.0181 0.0549

-15 0.0225 0.0218 1.3032 16 0.0159 0.0340 0.9172

-14 -0.0067 0.0151 -0.3861 17 0.0113 0.0452 0.6513

-13 -0.0105 0.0046 -0.6062 18 0.0023 0.0476 0.1340

-12 -0.0417 -0.0371 -2.4101 19 0.0130 0.0606 0.7516

-11 0.0165 -0.0205 0.9539 20 -0.0467 0.0139 -2.7001

-10 -0.0370 -0.0576 -2.1391 21 -0.0159 -0.0021 -0.9215

-9 -0.0088 -0.0664 -0.5108 22 0.0049 0.0028 0.2829

-8 0.0374 -0.0290 2.1601 23 -0.0209 -0.0181 -1.2060

-7 -0.0153 -0.0443 -0.8823 24 0.0133 -0.0048 0.7675

-6 0.0343 -0.0100 1.9831 25 -0.0203 -0.0251 -1.1739

-5 -0.0019 -0.0118 -0.1080 26 0.0017 -0.0234 0.0987

-4 -0.0010 -0.0129 -0.0587 27 -0.0170 -0.0404 -0.9843

-3 0.0386 0.0257 2.2285 28 0.0078 -0.0326 0.4489

-2 -0.0168 0.0089 -0.9704 29 0.0167 -0.0160 0.9624

-1 0.0244 0.0333 1.4105 30 0.0030 -0.0130 0.1734


Positive AR is seen for 15 days before the Dividend announcement and 18 days

after the announcement it shows that stock is giving abnormal return after the

announcement more than before the announcement date.


-6th

-

3rd

days and +1st days split information and hence it can be concluded that abnormal

returns cannot be earned on release Dividend announcement.

Hypothesis testing







AR

Before After

Mean 0.00111 -0.0004

t Test 1.92503 -0.751




that the Dividend information will not influence share price of the companies in a

significant manner.



Above graph showing CAR in before and after announcement is positive it

reveals that there is positive abnormal return before and after announcement window.

-0.0800

-0.0600

-0.0400

-0.0200

0.0000

0.0200

0.0400

0.0600

0.0800

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


3. Hindustan Petroleum Corporation Ltd.


Before After


-30 0.0176 0.0176 0.93 1 -0.0210 -0.0210 -1.11

-29 0.0082 0.0258 0.43 2 -0.0042 -0.0252 -0.22

-28 0.0205 0.0463 1.09 3 0.0080 -0.0171 0.43

-27 0.0325 0.0788 1.72 4 0.0016 -0.0155 0.09

-26 0.0171 0.0960 0.91 5 -0.0266 -0.0421 -1.41

-25 -0.0070 0.0890 -0.37 6 0.0014 -0.0407 0.08

-24 -0.0009 0.0881 -0.05 7 0.0095 -0.0312 0.51

-23 -0.0320 0.0561 -1.70 8 -0.0001 -0.0313 -0.01

-22 -0.0190 0.0372 -1.00 9 0.0078 -0.0234 0.42

-21 0.0084 0.0456 0.45 10 0.0079 -0.0156 0.42

-20 -0.0177 0.0279 -0.94 11 -0.0501 -0.0657 -2.65

-19 -0.0040 0.0239 -0.21 12 -0.0340 -0.0997 -1.80

-18 0.0703 0.0942 3.72 13 0.0094 -0.0903 0.50

-17 -0.0008 0.0934 -0.04 14 0.0268 -0.0635 1.42

-16 0.0000 0.0935 0.00 15 0.0209 -0.0426 1.11

-15 -0.0573 0.0361 -3.04 16 -0.0157 -0.0583 -0.83

-14 -0.0043 0.0318 -0.23 17 0.0095 -0.0488 0.51

-13 -0.0322 -0.0004 -1.71 18 -0.0214 -0.0702 -1.14

-12 -0.0051 -0.0055 -0.27 19 -0.0057 -0.0759 -0.30

-11 0.0257 0.0202 1.36 20 -0.0005 -0.0764 -0.02

-10 -0.0168 0.0034 -0.89 21 -0.0168 -0.0932 -0.89

-9 0.0099 0.0132 0.52 22 0.0236 -0.0696 1.25

-8 0.0007 0.0140 0.04 23 -0.0245 -0.0941 -1.30

-7 -0.0176 -0.0036 -0.93 24 0.0067 -0.0874 0.35

-6 0.0469 0.0433 2.48 25 -0.0341 -0.1215 -1.81

-5 -0.0040 0.0393 -0.21 26 -0.0007 -0.1222 -0.04

-4 0.0012 0.0405 0.07 27 0.0094 -0.1128 0.50

-3 -0.0106 0.0299 -0.56 28 -0.0036 -0.1164 -0.19


-2 0.0215 0.0514 1.14 29 0.0164 -0.1000 0.87

-1 -0.0022 0.0492 -0.12 30 0.0145 -0.0855 0.77

Positive AR is seen for 13 days before the dividend announcement and 15 days

after the announcement it shows that stock is giving abnormal return after the

announcement more than before the announcement date.


-18 -

6 days dividend information and hence it can be concluded that abnormal returns cannot

be earned on release split announcement.

Hypothesis testing







AR

Before After

Mean 0.0016 -0.0028

t Test 2.6048 -4.5280




that the dividend information will influence share price of the companies in a significant

manner.





window.

-0.1500

-0.1000

-0.0500

0.0000

0.0500

0.1000

0.1500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


4. Larsen & Toubro Ltd.


Before After


-30 -0.0028 -0.0028 -0.27 1 -0.0109 -0.0109 -1.03

-29 -0.0061 -0.0089 -0.58 2 0.0114 0.0005 1.07

-28 -0.0091 -0.0181 -0.86 3 -0.0003 0.0001 -0.03

-27 -0.0084 -0.0265 -0.79 4 -0.0021 -0.0020 -0.20

-26 -0.0143 -0.0407 -1.34 5 0.0206 0.0186 1.94

-25 0.0100 -0.0308 0.94 6 0.0018 0.0204 0.17

-24 0.0134 -0.0174 1.26 7 0.0154 0.0358 1.45

-23 -0.0134 -0.0309 -1.27 8 -0.0082 0.0276 -0.77

-22 -0.0042 -0.0351 -0.40 9 -0.0077 0.0199 -0.72

-21 -0.0070 -0.0421 -0.65 10 -0.0237 -0.0038 -2.23

-20 -0.0023 -0.0443 -0.21 11 -0.0130 -0.0168 -1.22

-19 -0.0037 -0.0481 -0.35 12 -0.0152 -0.0320 -1.43

-18 0.0242 -0.0238 2.28 13 0.0074 -0.0246 0.69

-17 0.0056 -0.0182 0.53 14 -0.0249 -0.0495 -2.35

-16 -0.0051 -0.0233 -0.48 15 0.0030 -0.0465 0.29

-15 -0.0031 -0.0264 -0.29 16 -0.0244 -0.0709 -2.30

-14 -0.0049 -0.0313 -0.46 17 -0.0142 -0.0851 -1.34

-13 -0.0014 -0.0326 -0.13 18 0.0079 -0.0772 0.74

-12 0.0027 -0.0299 0.25 19 -0.0003 -0.0775 -0.03

-11 -0.0087 -0.0387 -0.82 20 0.0145 -0.0630 1.37

-10 0.0114 -0.0273 1.07 21 0.0212 -0.0419 1.99

-9 0.0046 -0.0228 0.43 22 -0.0021 -0.0440 -0.20

-8 -0.0033 -0.0261 -0.31 23 -0.0085 -0.0524 -0.80

-7 -0.0156 -0.0416 -1.47 24 -0.0011 -0.0535 -0.10

-6 -0.0025 -0.0442 -0.24 25 0.0027 -0.0508 0.25

-5 -0.0167 -0.0608 -1.57 26 0.0074 -0.0434 0.70

-4 -0.0098 -0.0707 -0.93 27 -0.0038 -0.0472 -0.35

-3 -0.0024 -0.0730 -0.22 28 0.0005 -0.0467 0.05

-2 -0.0072 -0.0803 -0.68 29 0.0049 -0.0418 0.46

-1 -0.0041 -0.0843 -0.38 30 0.0215 -0.0202 2.03


Positive AR is seen for 6 days before the dividend announcement and 8 days after

the announcement it shows that stock is giving abnormal return after the announcement

more than before the announcement date.


days

and +5th

+21 +30 days dividend information and hence it can be concluded that abnormal

returns can be earned on release dividend announcement.

Hypothesis testing







AR

Before After

Mean -0.0028 -0.0007

t Test -7.9423 -0.0635

The mean value of AR for 30 days before the announcement is -0.0028 and that

for 30 days after the announcement is -0.0007. To test the significance of difference t test



manner.



Above graph showing CAR in before and after announcement is Negative t it

reveals that there is no positive abnormal return in both announcement window.

-0.1000

-0.0800

-0.0600

-0.0400

-0.0200

0.0000

0.0200

0.0400

0.0600

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


5. Maruti Suzuki India Ltd.


Before After


-30 0.0192 0.0192 1.62 1 -0.0200 -0.0200 -1.69

-29 -0.0025 0.0167 -0.21 2 -0.0035 -0.0235 -0.29

-28 0.0025 0.0192 0.21 3 -0.0060 -0.0294 -0.50

-27 -0.0039 0.0153 -0.33 4 -0.0057 -0.0351 -0.48

-26 0.0045 0.0198 0.38 5 0.0011 -0.0340 0.09

-25 -0.0032 0.0165 -0.27 6 0.0161 -0.0179 1.36

-24 0.0145 0.0311 1.22 7 0.0008 -0.0171 0.06

-23 0.0065 0.0375 0.55 8 0.0136 -0.0035 1.14

-22 0.0027 0.0403 0.23 9 0.0028 -0.0007 0.24

-21 0.0077 0.0480 0.65 10 0.0223 0.0215 1.88

-20 0.0147 0.0626 1.24 11 0.0028 0.0243 0.23

-19 -0.0010 0.0616 -0.09 12 0.0042 0.0285 0.36

-18 -0.0027 0.0590 -0.23 13 -0.0094 0.0191 -0.79

-17 0.0214 0.0804 1.81 14 0.0081 0.0272 0.68

-16 0.0026 0.0830 0.22 15 -0.0009 0.0263 -0.08

-15 0.0014 0.0844 0.12 16 0.0011 0.0274 0.10

-14 -0.0069 0.0775 -0.58 17 0.0196 0.0470 1.65

-13 0.0020 0.0795 0.17 18 0.0139 0.0609 1.17

-12 0.0143 0.0938 1.20 19 0.0022 0.0631 0.18

-11 0.0089 0.1027 0.75 20 0.0137 0.0768 1.16

-10 0.0004 0.1031 0.03 21 -0.0005 0.0763 -0.04

-9 0.0098 0.1129 0.83 22 0.0263 0.1026 2.21

-8 0.0013 0.1142 0.11 23 -0.0093 0.0933 -0.78

-7 -0.0046 0.1097 -0.38 24 -0.0243 0.0690 -2.05

-6 0.0202 0.1298 1.70 25 -0.0549 0.0141 -4.63

-5 0.0051 0.1350 0.43 26 -0.0171 -0.0030 -1.44

-4 0.0037 0.1387 0.31 27 0.0009 -0.0021 0.07

-3 -0.0056 0.1331 -0.47 28 0.0017 -0.0004 0.14

-2 -0.0144 0.1187 -1.21 29 -0.0241 -0.0245 -2.03

-1 -0.0233 0.0953 -1.97 30 -0.0060 -0.0305 -0.51


Positive AR is seen for 21 days before the dividend announcement and 16 days

after the announcement it shows that stock is giving abnormal return before the

announcement more than after the announcement date.


-17

days and +10 +22th

days dividend information and hence it can be concluded that

abnormal returns can be earned on release dividend announcement.

Hypothesis testing







AR

Before After

Mean 0.0032 -0.0010

t Test 8.0350 -2.5693




that the dividend information will influence share price of the companies in a significant

manner before announcement window.



Above graphs are showing CAR in before announcement is positive and Negative


window.

-0.0600

-0.0400

-0.0200

0.0000

0.0200

0.0400

0.0600

0.0800

0.1000

0.1200

0.1400

0.1600

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


IV. MERGER and AQUISION

To analyze the impact of Merger and acquisition announcement on selected

companies the abnormal returns of beta adjusted share prices of companies having

dividend announcement were found for each day in the event window .

There are five selected Merger and acquisition announcements companies

samples (Recent 5 Companies) are considered for the analysis in the sample companies

during the study period. The abnormal returns of each company on each day are found

out and it is cumulated to get CAR. This part focuses on the effect of dividend

information release by testing the significance of difference in returns between the period

before and after the Merger and acquisition announcement.

1. Asian paint


Before After


-30 -0.0168 -0.0168 -0.92 1 0.0396 0.0396 2.18

-29 0.0204 0.0036 1.12 2 -0.0088 0.0308 -0.49

-28 0.0012 0.0048 0.07 3 -0.0396 -0.0088 -2.18

-27 0.0056 0.0104 0.31 4 0.0102 0.0014 0.56

-26 -0.0057 0.0047 -0.31 5 -0.0099 -0.0085 -0.54

-25 0.0137 0.0184 0.76 6 0.0065 -0.0019 0.36

-24 0.0086 0.0271 0.48 7 -0.0033 -0.0052 -0.18

-23 0.0002 0.0273 0.01 8 -0.0099 -0.0151 -0.55

-22 0.0073 0.0346 0.40 9 0.0050 -0.0101 0.28

-21 -0.0039 0.0307 -0.21 10 -0.0053 -0.0154 -0.29

-20 -0.0173 0.0134 -0.95 11 0.0128 -0.0026 0.71

-19 -0.0159 -0.0026 -0.88 12 0.0150 0.0124 0.82

-18 0.0069 0.0043 0.38 13 0.0030 0.0154 0.16

-17 0.0020 0.0063 0.11 14 -0.0187 -0.0033 -1.03

-16 -0.0098 -0.0035 -0.54 15 0.0144 0.0110 0.79

-15 -0.0170 -0.0205 -0.93 16 -0.0025 0.0086 -0.14

-14 0.0037 -0.0167 0.20 17 0.0014 0.0099 0.08


-13 -0.0086 -0.0254 -0.48 18 -0.0078 0.0021 -0.43

-12 -0.0260 -0.0514 -1.43 19 -0.0132 -0.0111 -0.73

-11 0.0205 -0.0309 1.13 20 -0.0055 -0.0166 -0.30

-10 -0.0108 -0.0417 -0.60 21 -0.0241 -0.0407 -1.33

-9 0.0160 -0.0257 0.88 22 -0.0072 -0.0479 -0.40

-8 0.0057 -0.0199 0.32 23 -0.0132 -0.0611 -0.73

-7 0.0027 -0.0172 0.15 24 0.0047 -0.0564 0.26

-6 -0.0018 -0.0190 -0.10 25 0.0041 -0.0523 0.22

-5 0.0111 -0.0080 0.61 26 0.0161 -0.0362 0.89

-4 -0.0211 -0.0290 -1.16 27 0.0086 -0.0276 0.48

-3 0.0048 -0.0243 0.26 28 -0.0033 -0.0308 -0.18

-2 0.0001 -0.0242 0.01 29 0.0098 -0.0211 0.54

-1 -0.0053 -0.0294 -0.29 30 0.0003 -0.0208 0.01

Positive AR is seen for 17 days before the Merger and acquisition announcement

and 14 days after the announcement it shows that stock is giving abnormal return before

the announcement more than after the announcement date.

The above table reveals that AR shows significant increase only on the +2nd

days

Merger and acquisition information and hence it can be concluded that abnormal returns

cannot be earned on release Merger and acquisition announcement.

Hypothesis testing







AR

Before After

Mean -0.001 -0.0007

t Test -1.6212 -1.1482


The mean value of AR for 30 days before the announcement is -0.001 and that for



that the Merger and acquisition information will not influence share price of the

companies in a significant manner.




window

-0.0800

-0.0600

-0.0400

-0.0200

0.0000

0.0200

0.0400

0.0600

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


2. Kotak Mahindra Bank


Before After


-30 0.0092 0.0092 0.60 1 0.0275 0.0275 1.78

-29 -0.0055 0.0037 -0.35 2 0.0212 0.0487 1.38

-28 -0.0015 0.0022 -0.10 3 -0.0115 0.0372 -0.75

-27 0.0187 0.0209 1.21 4 -0.0135 0.0237 -0.87

-26 0.0267 0.0476 1.74 5 0.0369 0.0606 2.40

-25 -0.0079 0.0397 -0.52 6 -0.0091 0.0515 -0.59

-24 0.0033 0.0430 0.21 7 0.0139 0.0654 0.91

-23 -0.0125 0.0305 -0.81 8 0.0056 0.0710 0.36

-22 0.0408 0.0712 2.65 9 -0.0146 0.0564 -0.95

-21 0.0004 0.0716 0.02 10 -0.0149 0.0415 -0.96

-20 -0.0013 0.0703 -0.08 11 0.0028 0.0443 0.18

-19 0.0063 0.0767 0.41 12 -0.0064 0.0379 -0.42

-18 0.0010 0.0777 0.07 13 0.0007 0.0386 0.05

-17 -0.0220 0.0557 -1.43 14 0.0151 0.0538 0.98

-16 -0.0087 0.0470 -0.57 15 0.0020 0.0558 0.13

-15 0.0236 0.0705 1.53 16 -0.0134 0.0423 -0.87

-14 -0.0123 0.0583 -0.80 17 -0.0057 0.0366 -0.37

-13 -0.0094 0.0488 -0.61 18 -0.0032 0.0334 -0.21

-12 -0.0181 0.0308 -1.17 19 0.0067 0.0401 0.44

-11 0.0085 0.0393 0.55 20 -0.0111 0.0290 -0.72

-10 0.0067 0.0460 0.43 21 0.0631 0.0921 4.10

-9 -0.0102 0.0358 -0.66 22 -0.0319 0.0603 -2.07

-8 0.0177 0.0535 1.15 23 -0.0282 0.0321 -1.83

-7 0.0007 0.0542 0.05 24 0.0043 0.0364 0.28

-6 0.0062 0.0604 0.40 25 -0.0030 0.0334 -0.19

-5 -0.0114 0.0490 -0.74 26 0.0022 0.0356 0.14

-4 -0.0005 0.0485 -0.03 27 0.0055 0.0410 0.35

-3 -0.0035 0.0450 -0.23 28 -0.0077 0.0334 -0.50


-2 -0.0023 0.0427 -0.15 29 0.0077 0.0411 0.50

-1 -0.0017 0.0410 -0.11 30 0.0047 0.0457 0.30

Positive AR is seen for 14 days before the merger and acquisition announcement

and 16 days after the announcement it shows that stock is giving abnormal return after

the announcement more than before the announcement date.

The above table reveals that AR shows significant increase only on the -22nd

26th

days and +1st +5

th +21

st days merger and acquisition information and hence it can be

concluded that abnormal returns can be earned on release Merger and acquisition

announcement.

Hypothesis testing







AR

Before After

Mean 0.0014 0.0015

t Test 2.6640 2.9687




the merger and acquisition information will influence share price of the companies in a

significant manner.



Above graphs are showing CAR in before announcement is positive and Negati69ve after

announcement it reveals that there is positive abnormal return before announcement

window.

0.0000

0.0100

0.0200

0.0300

0.0400

0.0500

0.0600

0.0700

0.0800

0.0900

0.1000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


3. TCS


Before After


-30 0.0072 0.0072 0.62 1 -0.0014 -0.0014 -0.13

-29 0.0082 0.0154 0.71 2 0.0184 0.0170 1.60

-28 -0.0052 0.0102 -0.45 3 -0.0027 0.0143 -0.23

-27 -0.0011 0.0091 -0.10 4 -0.0081 0.0063 -0.70

-26 -0.0267 -0.0176 -2.31 5 -0.0016 0.0047 -0.13

-25 -0.0214 -0.0390 -1.85 6 -0.0044 0.0003 -0.38

-24 0.0089 -0.0301 0.77 7 -0.0109 -0.0106 -0.94

-23 -0.0033 -0.0334 -0.28 8 0.0093 -0.0012 0.81

-22 0.0148 -0.0185 1.28 9 -0.0102 -0.0114 -0.88

-21 -0.0080 -0.0265 -0.69 10 -0.0053 -0.0167 -0.46

-20 0.0079 -0.0186 0.68 11 -0.0005 -0.0172 -0.04

-19 0.0079 -0.0107 0.69 12 0.0013 -0.0159 0.11

-18 -0.0016 -0.0123 -0.14 13 0.0255 0.0096 2.21

-17 -0.0195 -0.0317 -1.69 14 -0.0021 0.0076 -0.18

-16 -0.0141 -0.0458 -1.22 15 -0.0108 -0.0032 -0.94

-15 0.0102 -0.0356 0.88 16 0.0032 0.0000 0.28

-14 0.0063 -0.0293 0.55 17 -0.0068 -0.0069 -0.59

-13 0.0035 -0.0257 0.31 18 -0.0050 -0.0119 -0.44

-12 0.0005 -0.0252 0.05 19 -0.0020 -0.0139 -0.17

-11 -0.0140 -0.0392 -1.21 20 0.0015 -0.0123 0.13

-10 0.0054 -0.0338 0.47 21 -0.0035 -0.0159 -0.30

-9 -0.0015 -0.0353 -0.13 22 0.0001 -0.0157 0.01

-8 0.0009 -0.0344 0.08 23 -0.0006 -0.0163 -0.05

-7 0.0095 -0.0248 0.82 24 -0.0042 -0.0205 -0.36

-6 0.0113 -0.0136 0.97 25 -0.0015 -0.0220 -0.13

-5 -0.0077 -0.0213 -0.67 26 0.0007 -0.0213 0.06

-4 0.0097 -0.0116 0.84 27 0.0006 -0.0207 0.05

-3 0.0165 0.0050 1.43 28 0.0154 -0.0053 1.33

-2 0.0337 0.0386 2.91 29 0.0099 0.0046 0.86

-1 -0.0130 0.0256 -1.13 30 -0.0026 0.0020 -0.22






days

and +19th

days merger and acquisition information and hence it can be concluded that

abnormal returns cannot be earned on release merger and acquisition announcement.

Hypothesis testing







AR

Before After

Mean 0.0009 0.0001

t Test 2.2177 0.0115




the merger and acquisition information will not influence share price of the companies in

a significant manner.





window.

-0.0600

-0.0500

-0.0400

-0.0300

-0.0200

-0.0100

0.0000

0.0100

0.0200

0.0300

0.0400

0.0500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


4. Sun pharma


Before After


-30 -0.0008 -0.0008 -0.06 1 -0.0040 -0.0040 -0.32

-29 -0.0032 -0.0040 -0.26 2 -0.0348 -0.0388 -2.78

-28 0.0005 -0.0035 0.04 3 0.0041 -0.0346 0.33

-27 -0.0203 -0.0238 -1.62 4 0.0243 -0.0104 1.94

-26 -0.0257 -0.0495 -2.05 5 -0.0232 -0.0336 -1.85

-25 0.0084 -0.0411 0.67 6 -0.0238 -0.0574 -1.90

-24 0.0335 -0.0076 2.67 7 -0.0450 -0.1023 -3.59

-23 0.0113 0.0037 0.90 8 0.0135 -0.0889 1.08

-22 0.0179 0.0217 1.43 9 -0.0899 -0.1787 -7.17

-21 0.0672 0.0889 5.36 10 0.0142 -0.1646 1.13

-20 0.0310 0.1199 2.48 11 -0.0246 -0.1892 -1.96

-19 0.0115 0.1315 0.92 12 0.0101 -0.1791 0.80

-18 -0.0144 0.1171 -1.15 13 -0.0178 -0.1969 -1.42

-17 -0.0136 0.1035 -1.09 14 -0.0061 -0.2030 -0.48

-16 0.0207 0.1242 1.65 15 0.0177 -0.1853 1.41

-15 -0.0171 0.1071 -1.36 16 0.0023 -0.1829 0.19

-14 0.0165 0.1237 1.32 17 0.0007 -0.1822 0.06

-13 0.0071 0.1308 0.57 18 0.0124 -0.1698 0.99

-12 0.0059 0.1367 0.47 19 -0.0122 -0.1820 -0.97

-11 0.0034 0.1401 0.27 20 -0.0069 -0.1888 -0.55

-10 -0.0150 0.1251 -1.20 21 0.0074 -0.1815 0.59

-9 -0.0016 0.1236 -0.13 22 0.0179 -0.1636 1.43

-8 0.0155 0.1391 1.24 23 -0.0050 -0.1686 -0.40

-7 0.0136 0.1527 1.09 24 0.0008 -0.1678 0.07

-6 -0.0168 0.1360 -1.34 25 -0.0116 -0.1794 -0.93

-5 -0.0167 0.1192 -1.34 26 0.0004 -0.1790 0.03

-4 -0.0066 0.1126 -0.53 27 0.0067 -0.1723 0.53

-3 0.0115 0.1241 0.92 28 -0.0009 -0.1733 -0.08

-2 0.0493 0.1734 3.94 29 0.0081 -0.1651 0.65

-1 0.0767 0.2502 6.12 30 0.0152 -0.1499 1.21






-21st

20th

-2nd

-1st days and +4

th days merger and acquisition information and hence it can be

concluded that abnormal returns can be earned on release Merger and acquisition

announcement.

Hypothesis testing







AR

Before After

Mean 0.0083 -0.0050

t Test 19.9591 -11.9617




that the merger and acquisition information will influence share price of the companies in

a significant manner before announcement window.


Graph showing CAR before and before Announcement



window.

-0.2500

-0.2000

-0.1500

-0.1000

-0.0500

0.0000

0.0500

0.1000

0.1500

0.2000

0.2500

0.3000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


5. Lupin


Before After


-30 -0.0163 -0.0163 -0.84 1 -0.0283 -0.0283 -1.46

-29 0.0062 -0.0101 0.32 2 -0.0215 -0.0498 -1.10

-28 -0.0064 -0.0165 -0.33 3 -0.0029 -0.0527 -0.15

-27 -0.0139 -0.0304 -0.71 4 0.0154 -0.0373 0.79

-26 0.0181 -0.0123 0.93 5 -0.0115 -0.0488 -0.59

-25 0.0267 0.0144 1.37 6 0.0337 -0.0151 1.73

-24 0.0109 0.0253 0.56 7 -0.0203 -0.0354 -1.04

-23 -0.0124 0.0128 -0.64 8 -0.0112 -0.0466 -0.57

-22 -0.0236 -0.0108 -1.21 9 0.0177 -0.0289 0.91

-21 0.0205 0.0097 1.06 10 0.0117 -0.0172 0.60

-20 0.0110 0.0207 0.56 11 -0.0034 -0.0206 -0.17

-19 0.0044 0.0251 0.23 12 0.0047 -0.0159 0.24

-18 0.0028 0.0279 0.14 13 0.0046 -0.0113 0.24

-17 0.0250 0.0530 1.29 14 0.0226 0.0113 1.16

-16 -0.0114 0.0416 -0.59 15 0.0218 0.0331 1.12

-15 -0.0041 0.0375 -0.21 16 0.0080 0.0411 0.41

-14 0.0137 0.0512 0.70 17 0.0019 0.0430 0.10

-13 0.0072 0.0584 0.37 18 -0.0215 0.0215 -1.10

-12 -0.0064 0.0520 -0.33 19 0.0206 0.0422 1.06

-11 -0.0062 0.0458 -0.32 20 0.0612 0.1034 3.14

-10 0.0088 0.0546 0.45 21 -0.0032 0.1002 -0.16

-9 -0.0109 0.0437 -0.56 22 0.0016 0.1018 0.08

-8 0.0027 0.0464 0.14 23 0.0067 0.1086 0.35

-7 0.0132 0.0596 0.68 24 -0.0024 0.1061 -0.12

-6 0.0105 0.0701 0.54 25 0.0332 0.1394 1.71

-5 -0.0008 0.0693 -0.04 26 -0.0223 0.1170 -1.15

-4 0.0096 0.0789 0.49 27 0.0370 0.1540 1.90

-3 0.0021 0.0810 0.11 28 -0.0200 0.1341 -1.03

-2 -0.0416 0.0394 -2.14 29 0.0151 0.1492 0.78

-1 -0.0409 -0.0015 -2.10 30 -0.0180 0.1312 -0.93



and 17 days after the announcement it shows that stock is giving abnormal return both the

announcement window.

The above table reveals that AR shows significant increase only on the +5th

and

+20 days merger and acquisition information and hence it can be concluded that

abnormal returns cannot be earned on release Merger and acquisition announcement.

Hypothesis testing







AR

Before After

Mean 0.0000 0.0044

t Test -0.0764 6.7429




the merger and acquisition information will influence share price of the companies in a

significant manner.



Above graph showing CAR in before announcement is Negative and positive


window.

-0.1000

-0.0500

0.0000

0.0500

0.1000

0.1500

0.2000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

CAR Before

CAR After


6. Findings

1. Corporate actions are having positive impact on stock prices.

2. All selected stocks are earning more number of positive abnormal return before window

and less number of positive abnormal returns after announcement window

3. Corporate actions lead to more liquidity of the securities.

4. Investors are earning abnormal return before announcement window but abnormal return

was not statistically not significant


7. Recommendations

a. Before announcement window of corporate action is time window that maximizes the

return for shareholders.

b. After period of announcement of corporate action is not gives satisfactory return

c. Investor can earn abnormal return surrounding the corporate announcement.

Conclusion

Overall company analysis shows that more number of positive abnormal returns before

corporate action announcement and less number of positive abnormal returns after

announcement. Hence, it can be stated that market reacts to corporate action

announcement positively before announcement and less positive after the announcement.

Paired sample t test proves that corporate action announcement exerts an impact on share

price. This study is of immense utility to investors as they can understand changes in

share prices of companies and market movement during bonus announcements that

would be helpful to them for making good portfolio investment decision in the right time.


Bibliography

www.bseindia.com

www.nseindia.com

www.moneycontrol.com

www.economictimes.com

www.businessline.com

www.eventstudytools.com

http://www.bseindia.com/

http://www.nseindia.com/

http://www.moneycontrol.com/

http://www.economictimes.com/

http://www.businessline.com/

http://www.eventstudytools.com/

Date post:	22-Jan-2017
Category:	Business
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