A SYNOPSIS OF PROJECT REPORT TITLED

IMPACT OF BONUS ISSUE / STOCK SPLITS ON STOCK RETURNS & ITS VOLATILITY
Submitted in partial fulfillment for the MBA degree course of Bangalore University

SUBMITTED BY

SRINIVAS REDDY.G 10SLCMA141

Under the guidance of DR. seema goel

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT HSR LAYOUT BANGALORE 560102 2010 2012

SYNOPSIS 1- Title Of The Study:

Impact of bonus issue / stock splits on stock returns & its volatility

2- Introduction to the study:

Bonus issue includes an offer of free additional shares to existing shareholders. A company may decide to distribute further shares as an alternative to increase the dividend payout. Also known as Capitalization Issue This is mainly done to conserve cash by declaring a bonus issue in lieu of a cash dividend. It also increases the number of shares in the market; it therefore increases the liquidity/marketability of the stock. A stock split is a procedure that increases or decreases a corporation's total number of shares outstanding without altering the firm's market value or the proportionate ownership interest of existing shareholders. This action, which requires advance approval from the company's board of directors, usually involves the issuance of additional shares to existing stockholders. Regarding, volatility & market efficiency these are two important features which will ultimately determine the effectiveness of the stock market in economic development. In this dissertation, report it reveals that the closing stock prices before the bonus issue/stock split & after the bonus issue/stock split is entirely different.

3- Statement of the problem: In a perfect market, the market value of a firm's equity is independent of the number of shares outstanding. Therefore the ex-date for bonus issue/stock split should simply involve a change in the number of shares outstanding along with a change in the level of the stock price. There should be no change in the distribution of stock returns around ex-dates of stock dividends. Previous research has documented changes in stock return distributions around these ex-dates, i.e. post split dates. This suggests that there is an implied volatility in stock returns after the bonus issue/stock splits.

4- Objectives: i. To examine the effects of bonus issue/stock splits on equity prices during the period Jan 2000 to Jan 20011 ii. To investigate the changes in implied volatility of returns around ex-dates, i.e. before the bonus issue /stock split . iii. To investigate the changes in implied volatility of returns around ex-dates, i.e. after the bonus issue/stock splits. iv. To investigate the changes in implied volatility of returns around ex-dates, i.e. before the bonus issue/stock splits. v. To identify the causes of bonus issue/stock splits & volatility of stock returns

5- Scope of the study: To tackle volatility is by investing on a regular basis through Systematic investment plans (SIP). This means making periodic investments of the same amount of money in an equity fund, regardless of whether the stock market is declining or ascending. i.e by investing the same amount over a period, without worrying about the timing. SIP can protect in a volatile market. When this kind of an advantage is available through Systematic investment plans, investors should come forward to invest their amount of money in an equity fund to protect against volatility. 6- Research design: Types of data : Information about the companies that have resorted to bonus issue/stock split during the period 2000-2011 has been gathered. The information regarding the share price before and after bonus issue/stock split has been gathered from the NSE & BSE website. The closing price of the shares of the respective companies will been taken into consideration for the analysis. Tools: 15 Companies closing stock prices shall be collected to conduct the research process. 15 days prior the bonus issue/stock split & after the bonus issue/stock splits has been collected to consider them as samples for conducting T-test. Since, these are independent samples n1 & n2 with small sample sizes, normally distributed populations & the assumption of equal population variance, the t-test is appropriate.

Sample size: The sample includes 10 companies, which have resorted to bonus issue/stock splits during the period 2000-2011. Thus, the sample size has been restricted to 10 for this research.

7- Limitations: The study and the analysis are limited to the information available on the Internet, as well as, reports and journals. The study confines itself to the data of companies, which have gone for bonus issue/stock splits between the years 2000 to 2011. The bonus issue/stock splits before the periods have not been taken into consideration. Accuracy of information will be depending on the recent updated articles, reports, journals, research papers and on web-sites.

8- Chapter Scheme: Chapter 1: Introduction Chapter 2: Research Design Chapter 3: profile of company / Organization Chapter 4: Analysis & interpretation of the data Chapter 6: Summary of findings, conclusions and recommendations

9- Bibliography : It includes List of books, magazines, journals, newspapers, websites & other sources 10- Annexure: This includes all those materials which be of use to the readers for clear understanding of the report.