IMPACT OF BONUS ISSUE AND RIGHTS ISSUE ON SELECTED FINANCIAL METRICS OF PHARMACEUTICAL COMPANIES IN INDIA

Abstract

Capitalization of company’s profits and reserves is done by a listed company by opting for a bonus issue and rights issue. Announcement for a bonus and rights issue is made when a company is undercapitalized. This study emphasizes on Indian Pharmaceutical Industry and focuses on the bonus and rights issue announcements made by the shortlisted companies in the last 10 years (FY12 to FY22). Objectives of the study included – ‘To measure the impact of selected corporate actions, i.e., Bonus Issue, and Rights Issue on Security Prices of selected pharmaceutical companies for the Window Period’, ‘to measure the impact of selected corporate actions on Earnings per Share (EPS), Ownership Pattern, and Return for shareholders’ of selected pharmaceutical companies comprising 24 Bonus Issues, and 4 Rights issues. For the purpose of analysis, the emphasis is on capturing change in EPS, measuring Abnormal Return, Cumulative Abnormal Return, Average Abnormal Return, and Cumulative Average Abnormal return so as to observe the impact of Bonus Issue and Rights Issue. Finally, t-statistics was applied in order to validate the results either positive or negative. The study provides insights that corporate actions such as bonus issues and rights issue have impact on the movement of security prices, Earnings per Share (EPS), Shareholding pattern, and Return for Shareholders.