Motives behind the return anomaly around bonus issue announcements: the case of emerging markets

Isiker M., Taş O.

REVIEW OF BEHAVIORAL FINANCE, vol.14, no.5, pp.806-832, 2022 (ESCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 14 Issue: 5
  • Publication Date: 2022
  • Doi Number: 10.1108/rbf-05-2020-0092
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Scopus
  • Page Numbers: pp.806-832
  • Keywords: Bonus issue, Cash substitution, Event study, Liquidity hypothesis, Signalling hypothesis, Stock dividends
  • Istanbul Technical University Affiliated: Yes


Purpose This paper aims to examine the stock return behaviour around the bonus issue announcements in eight emerging markets for 2010-2019 by addressing the signalling, cash substitution and liquidity hypotheses. Design/methodology/approach Besides using the standard event study technique to test the presence of an anomaly, country-based regression analyses are performed. Firm-specific factors are used to understand the motive behind the anomaly observed pre- and post-announcement periods. Also, the Amihud illiquidity measure examines the liquidity hypothesis, while standardized profitability and investment ratios compare the long-run operational performance of bonus issuers to test the validity of signalling. Findings The findings provide evidence that abnormal returns can be detected ten days before the announcement in some countries, which is a sign of information leakage. The presence of the effect continues only in two countries after the announcement is released. The size of the bonus issue is found strongly significant in most countries, while a weak relation between abnormal return and other factors is detected. Moreover, the signalling hypothesis does not hold in the sense of long-run profitability increase, while liquidity assertion is partially presented. Research limitations/implications Due to an inadequate number of announcements in other emerging markets, the number of sample countries is limited by eight. Originality/value The research is novel regarding analyzing a wide range of emerging countries with various variables. Also, the paper is distinguished from other studies by applying multiple set of regressions under nine different event windows.