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- Title
Evidence on changes in Stock Prices and Liquidity around Rights Issue Announcement: Industry Specific Analysis.
- Authors
Malhotra, Madhuri; Thenmozhi, M.; Gopalaswamy, Arun Kumar
- Abstract
This study examines the effect of rights issue announcement on firms' abnormal returns with respect to Indian firms in chemical, textile, IT and finance sectors respectively. Event study methodology has been used for the purpose of studying the rights issue announcement reaction. Liquidity changes around the rights issue announcement have been captured using the trading volume, raw trading volume and liquidity ratios. Rights issue announcement yields a positive return around the announcements date in the case of textile, IT and finance sectors, whereas, in the case of chemical sector, the rights issue announcement yields a negative reaction. The results of the study show that in the case of chemical and finance sectors, the stock market is semi strong form efficient as against textile and IT sectors. In the post announcement period, the announcement reaction is positive for textile and finance sectors and negative for chemical and IT sectors. The rights issue announcement reflects investor's sentiments about the market as a whole. Liquidity has decreased across all sectors as the liquidity ratio which captured market depth is significantly negative for all sectors under study. The study supports signaling hypothesis and information content hypothesis, but rejects liquidity hypothesis.
- Subjects
INDIA; STOCK prices; RIGHTS issue (Securities); LIQUIDITY (Economics); SECURITIES trading volume; TEXTILE industry; INFORMATION technology industry; FINANCIAL services industry
- Publication
International Journal of Business Insights & Transformation, 2012, Vol 5, Issue 2, p11
- ISSN
0974-5874
- Publication type
Article