ABSTRACT
In corresponding to the last chapter, this chapter still employ event studies to test the semi-strong form efficiency of China’s Stock Market, focusing on the reaction of stock returns to the announcements of bonus and rights issues. Bonus are shares allocated to the existing shareholders by free of charge, which are generated from either retained profit or accumulative capital reserve. Rights are also shares allocated to the existing shareholders with subscription price that generally is lower than current market price. Every year, more than half of the new shares floating in China’s Stock Market comes from bonus and rights issues, rather than from initial public offers of new firms listing. A firm may not distribute cash dividend, but allocates bonus or rights. This is the reason that bonus and rights issues draw more attention from shareholders and have more effect on the market than cash dividends.
