THE EFFECT OF RIGHTS ISSUE ANNOUNCEMENTS ON STOCK PRICES: AN EVIDENCE FROM ISTANBUL STOCK EXCHANGE

Abstract

With this study, it is aimed to examine whether the announcements of the rights issues announced to the public by companies listed in the BIST100 index between 2007 and 2016 without any interruption on the daily price returns of stocks. In this context, the announcements of the rights issues of companies included in the BIST100 index without interruption has been examined, and only the 13 rights issues, which was announced to be paid capital increase, was included in the study. In the study, in order to determine the effect of rights issue announcements, 11 event windows were created starting from the 15th day before the event to the 10th day after the event as announcement day to be accepted as the day of the event. These windows are divided into three groups, including pre-event, post-event, and pre-event and post-event days. Normal returns of stocks are estimated using the least squares method. In the least squares method, stock returns between [-150, -21] days are considered as dependent variables and market returns as independent variables. The abnormal returns in all event windows were calculated by taking the difference between the actual returns of the days in the event windows and the normal returns calculated by the least squares method, and whether the abnormal returns were statistically significant or not was determined by the t test. It is found that in one window from pre-event days, one window from post-evet days and four windows from pre-event and post- event days, rights issues announcements of companies listed in BIST100 index affect stock returns, thus it has been concluded that the validity of semi-strong form of the efficient market hypothesis in the relevant period in Turkey market is questionable.