Abstract
This study examines share price reaction to the announcement of bonus share issues for a sample of Australian companies over the period 1992 to 2000. The risk-adjusted price reaction from day 0 to day 1 is positive and statistically significant, averaging 2.37%. However, abnormal price reaction to bonus issue announcements is statistically significantly stronger for industrial nonfinancial companies and mining companies than financial companies. Finally, we find a significant positive cash flow performance, which is taken to indicate that companies that announced bonus share issues provide strong signals regarding their future performance.
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