STOCK PRICES REACTION TO EQUITY ISSUES ANNOUNCEMENT BY DEPOSIT MONEY BANKS (DMBs) IN NIGERIA,
STOCK PRICES REACTION TO EQUITY ISSUES ANNOUNCEMENT BY DEPOSIT MONEY BANKS (DMBs) IN NIGERIA,
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Date
2012-10
Authors
MOHAMMED, Ibrahim
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Abstract
The role of corporate information releases in promoting market efficiency cannot be
overstressed. Thus, the extent to which stock prices of a firm respond to the announcement of
corporate events such as equity issues announcements has far reaching implication on the
assessment such a firm receives from existing shareholders, prospective investors and other
market analysts. Despite these importance and the fact that studies on stock prices reaction
to equity issues announcements have become increasingly relevant in explaining semi-strong
form market efficiency; little or no research attention has been devoted to the study of such
reactions in Nigeria. Consequently, the objective of this study is to empirically examine the
reaction of stock prices to the announcement of equity issues by DMBs in Nigeria. The study
is correlational in nature and employed the standard event study methodology where the
abnormal return is computed as the residuals of the market model. Using a total of fourteen
announcements by thirteen DMBs from 1st January 2006 to 31st December 2010; the study
found a positive and significant cummulative abnormal return prior to the announcement
date and a negative and significant cummulative abnormal return on the announcement date.
The study therefore concluded that the presence of abnormal return suggests the semi-strong
form inefficiency of the Nigerian banking sector with respect to the announcement; while
evidence of abnormal return before the announcement is consistent with insider trading.
Consequently, it was recommended that there was the need for capital market regulators, the
SEC and the NSE, to put in place rules that will compel insiders to report the details of their
transactions not later than forty eight hours after they have been executed and entrench an
efficient information dissemination mechanism in the form of a dedicated daily capital market
journal in both print and electronic form that will ensure the instant and rapid circulation of
corporate events as they are announced by firms. Lastly, it was also recommended that the
regulatory authorities should ensure that the process of equity issues is undertaken under a
transparent, efficient and reliable framework devoid of manipulations.
Description
BEING A THESIS SUBMITTED TO THE SCHOOL OF POSTGRADUATE STUDIES,
AHMADU BELLO UNIVERSITY, ZARIA, IN PARTIAL FULFILMENT OF THE
REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF SCIENCE
(M.Sc) IN BUSINESS ADMINISTRATION.
Keywords
STOCK,, PRICES,, REACTION,, EQUITY,, ISSUES,, ANNOUNCEMENT,, DEPOSIT,, MONEY,, BANKS,, NIGERIA