Impact of rights issue on stock price fluctuations: An analysis of select scripts
Abstract
The impact of right-issue announcements on stock prices is investigated here. When rights issue taken place any company which impacts on price fluctuations and attracts the new investors (it means sometimes new investors may also chance to attract and make their investment) is through a right-issue offering. The study focusing on three companies, those have announced right-issue during 2022 viz. Asian Granito, Bhagiradha Chemicals and Industries Limited, and Dynemic Products Ltd. Secondary data has been collected for a period of 45 days’ window over the pre- and post-rights issue as well. In order to justify the research objectives at hand, the methods of cumulative average abnormal returns (CAAR) and autoregressive conditional heterioskedasticity (ARCH) (cumulative average abnormal returns (CAAR) it was provided in above also provide the full form of CAAR) have been applied. The findings of the study suggests that there exists either positive or negative returns in the pre-rights issue window pre-rights issue as compare to the post-rights issue. The study further demonstrates that fluctuations of the stock prices and returns during the pre-announcement period are significantly more than those in the post-announcement period. According to the results of the anomalous return study, the stock price reaction to the notification of a rights issue might be either positive or negative (this observation is contrary to the earlier observation – abnormal returns are higher during the pre-announcement periods). Announced a rights issue and have abnormal stock returns in the negative direction are likely to continue.
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DOI: https://doi.org/10.32629/jai.v7i5.876
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