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Andrew Ndege Ndambiri
MBA, Jomo Kenyatta University of Agriculture

Professor Osiemo
Jomo Kenyatta University of Agriculture


This research carried out an empirical analysis of market reaction around bonus issue announcement in the NSE. In most cases each and every Investor coming in to the security market faces a lot of uncertainty in an attempt to point out the cause of increase or decrease in the market price of securities and thus this research focused on the NSE as the sample in an attempt to know whether investors were adversely affected or not. The research used the event study approach where a sample of 12 firms which have had a bonus issue announcement larger than 25% for the period between 2005 to 2011 were selected and the researcher used a descriptive research where secondary data was used by analyzing security prices, NSE 20 share index, NASI Index and trading volume of firms which have been analyzed and presented from which findings and recommendations were made. The results obtained are consistent with previous studies conducted on emerging markets and not only, stating that there is significant non-zero cumulated abnormal return clustered closely around the event day but also supports the signaling hypothesis, Liquidity hypothesis and Cash substitution hypothesis but refutes the attention getting hypothesis of bonus issue announcement.

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