The Effects of Standardisation of Trading Board Lot And Bonus Issue On Stock Returns And Liquidity

• Main Author: Nor Elliany Hawa, Ibrahim
• Format: Thesis
• Language: English; English
• Published: 2023
• Subjects: HG Finance
• Online Access: https://etd.uum.edu.my/11157/1/depositpermission.pdf; https://etd.uum.edu.my/11157/2/s94400_01.pdf; https://etd.uum.edu.my/11157/

In 2003, Bursa Malaysia announced that the minimum number of shares per board lot Would be reduced from 1000 or 200 units to 100 units to eliminate odd-lot holdings And promote market liquidity. The initiative was implemented the same year, Completed in three stages, and was declared successful. To verify this claim, this study Uses event study methodology to examine the impact of the announcement and Implementation of the standardisation of trading board lot (STBL) event on stock Returns and liquidity. The findings show a negative market reaction on the day of the STBL announcement, which may be attributed to the unprecedented event factor and The lack of information released on that day. On the contrary, the study finds positive Market reactions during the STBL implementation event and significant improvement In stock liquidity, suggesting positive market reception towards the new policy. Furthermore, the lot size reduction is found to significantly improve stock liquidity. In Addition, this study examines bonus issue announcement events from 2000 to 2013. The event is shown to result in higher returns, volume turnover and a narrower bidask. The positive response implies that the bonus issue is viewed as value-enhancing, And managers might utilise the event to signal their positive expectations and private Information to the public. Short-term investors should earn a higher return by holding Long positions for several days during events in which firms declare their intentions to Issue bonus shares or comply with a newly enacted policy. This study also discovers That in the post-STBL implementation period, the weakened market reaction is Believed to be due to the redundancy effect of the STBL and bonus issue events. This Study proposes that the trading board lot system should be discontinued, allowing all Units of shares to be traded as a single unit, and making expensive stocks more Affordable to retail investors.