Abstract:
This paper studies the effect on listed firms' share prices on the Colombo stock
exchange to the right issue announcements. This study consists of 85 right issue
announcements (69 companies) over the 2012-2019 periods. The analytical tool is an
event study methodology in which the market model is used to calculate the abnormal
return and show how the abnormal return behaviors around the right issue
announcement day. The level of significance used at 5% to test whether the results
are significant or not. The observational findings indicate that the average abnormal
returns are statistically significant at the right issue announcement day and day before
the event. The cumulative average abnormal returns are statistically significant
around the right issue announcements date. The results conclude that the right issue
announcements are affecting the stock prices. However, there is no such evidence
that the market is in a semi-strong form efficiency as a summary of this paper.
