A Study to Analyse Effect of Corporate Actions on Stock Market Returns of Selected Indian IT Companies

  • Arti Chandani, Vivek Kulkarni, Mita Mehta


A primary reason an investor holds any company share is for capital gains. If there is an event which is going to bring a real change in equity or debt of listed company, that event is termed as corporate action. These corporate actions are to be agreed by the shareholders. The objective of this study is to find out if dividend announcements, bonus issues and stock splits lead to any abnormal returns for selected Indian IT companies.

This study tries to find out if such corporate actions have an impact on the market price of the company share, using event study methodology. This study uses Market Model developed by William Sharpe, to measure the stock market's reaction to corporate actions.

The study uses the data collected of last 10 years i.e. FY 2008-09 to 2017-18. This study includes 120 dividend announcements, 7 bonus issues and 1 share split of top 5 IT companies publically traded in India.

The result of this study shows that, abnormal returns at individual event level vary between approx. -30% to +20%. In many cases however, it is less than 1%. The mean abnormal returns, over period of 10 years of the stock, is between -4% to +3%. This means that chances of any investor making significant abnormal gains or losses during dividend announcements windows is very minimal.