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The Journal of Wealth Management

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Impact of Corporate Actions on Shareholder Wealth: A Study on the Bombay Stock Exchange

Subhendu Kumar Pradhan and R. Kasilingam
The Journal of Wealth Management Spring 2019, 21 (4) 85-97; DOI: https://doi.org/10.3905/jwm.2019.21.4.085
Subhendu Kumar Pradhan
is a postdoctoral fellow at the Indian Institute of Technology in Indore, Madhya Pradesh, India
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R. Kasilingam
is an associate professor in the Department of Management Studies at Pondicherry University in Puducherry, India
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Abstract

This study focuses on five corporate actions (dividend announcement, stock split, bonus issue, right issues, buy-back, and right issue) and attempts to determine their impact on shareholders’ wealth. The companies in the S&P BSE 500 index are taken as the total population, and the performance of those with corporate actions is compared to that in the broader universe. The study analyzes the impact by taking the share price of sampled companies for 30 days before and 30 days after the announcement of corporate actions. A paired-sample t-test is used to determine the impact of the corporate actions on share price in the event window period. The study concludes that corporate actions have significant impact on shareholders’ wealth; the level of impact is different for different corporate actions, but it does not differ according to the nature of the industry. The dividend and buy-back have a low level of impact, and bonus issues, rights issues, and stock splits have a high level of impact on shareholders’ wealth. Finally, the study proves that corporate actions are quite relevant to shareholders’ wealth.

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The Journal of Wealth Management: 21 (4)
The Journal of Wealth Management
Vol. 21, Issue 4
Spring 2019
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Impact of Corporate Actions on Shareholder Wealth: A Study on the Bombay Stock Exchange
Subhendu Kumar Pradhan, R. Kasilingam
The Journal of Wealth Management Jan 2019, 21 (4) 85-97; DOI: 10.3905/jwm.2019.21.4.085

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Impact of Corporate Actions on Shareholder Wealth: A Study on the Bombay Stock Exchange
Subhendu Kumar Pradhan, R. Kasilingam
The Journal of Wealth Management Jan 2019, 21 (4) 85-97; DOI: 10.3905/jwm.2019.21.4.085
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  • Article
    • Abstract
    • RESEARCH DESIGN
    • IMPACT OF CORPORATE ACTIONS ON SHARE PRICE
    • IMPACT OF CORPORATE ACTIONS ON SHAREHOLDER WEALTH
    • IMPACT OF CORPORATE ACTIONS ON SHAREHOLDER WEALTH: INDIVIDUAL IMPACT
    • IMPLICATIONS OF THE STUDY
    • CONCLUSION
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