Price and Liquidity Effects of Bonus Announcements: Empirical Evidence from Indian Stock Market.

This paper examines price and liquidity effects associated with stock dividend (bonus) surrounding its announcement and effective day by using event studies methodology. The results show that while there is sufficient evidence of positive abnormal return associated just prior to and on the announcement day, there is no significant return observed on ex-bonus day. On the contrary, significant negative abnormal return was found in long post-effective window (ED to ED+51 days). However, there is a significant improvement observed in trading volume surrounding the announcement and effective day of bonus. [ABSTRACT FROM AUTHOR]