The effect of bonus issue announcement to stock price movements / Siti Norahayu Yuso

In line with Malaysian development, securities market is observed to expand as what it is today. The companies are able to obtain their capital needed by issuing shares to the public. However, efforts to attract and maintain their shareholders is crucial in order to safeguard their capital structure. Giving out additional shares or bonus issues to the shareholders may provide confidence towards the company whereby people generally believe that it is good signalling device to the market on the profitability of the company. The purpose of this paper is to test the Malaysian stock market upon the announcement of bonus issues even though theoretically, it is known that proportional of ownership is remain unchanged. Furthermore, this paper explores on the nature of price movements using statistical measures such as mean, standard deviation and t-ratio. In most cases, price tends to follow the same pattern whereby slowly move upward prior to bonus issues announcement until its peak level at 1 to 3 days after the announcement date before declining to its normal level.
Therefore, perhaps there are insiders who might obtain abnormal returns due to the price fluctuations. Finally, Malaysian stock market is consider efficient towards the bonus issues announcement as the market react actively when receive news.