Economics at your fingertips  

Liquidity changes around bonus and rights issue announcements: Evidence from manufacturing and service sectors in India

Madhuri Malhotra, Thenmozhi M. and Arun Kumar Gopalaswamy

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the stock price liquidity changes before and after the bonus and rights issue announcements. Liquidity measured using raw trading volume ratio, relative trading volume ratio and liquidity ratio suggest that raw trading volume and relative trading volume have decreased around bonus and rights announcements. Market depth, as measured by the liquidity ratio, has significantly decreased after the bonus and rights issue announcement in the Indian stock market. There is evidence of negative and significant decrease in stock price liquidity for bonus and rights issue announcements similar to other issue announcements in US, UK and other emerging economies. The results support cash substitution hypothesis and signaling theory but rejects liquidity hypothesis with respect to bonus and rights issue announcements.

Keywords: Keywords: Bonus Issue; Rights Issue; Signaling Theory; Liquidity; Cash Substitution hypothesis (search for similar items in EconPapers)
JEL-codes: G1 G12 G3 (search for similar items in EconPapers)
Date: 2012-09-11
New Economics Papers: this item is included in nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Published in Wealth-International Journal of Money banking and Finance Issue 1.Volume(2012): pp. 28-34

Downloads: (external link) original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

Page updated 2023-11-11
Handle: RePEc:pra:mprapa:41216