Share Capitalization Changes, Information, And the Australian Equity Market

Abstract

Bonus issues, share splits and rights issues are studied in a replication and extension of the classic Fama, Fisher, Jensen and Roll study. On the Melbourne exchange, each category on average is associated with positive abnormal returns. However, the market does not appear to value bonuses or splits in their own right: prices appear to reflect the information released in the capitalization changes (and associated events). For example, share splits which were not accompanied by effective dividend increases did not experience positive abnormal returns. With one puzzling exception, the market behaviour was “efficient”.