|
Abstract
This paper explains the relationship between the investors’
base of a firm and the value of the firm. Empirical
studies on this topic show that “An increase in
the relative size of the firm’s Investor base
will reduce the firm’s cost of capital and increases
the market value of the firm. Thus managers of the firm
have an incentive to expand the firm’s investor
base”. A firm can increase its investors’
base by any of the following ways
 |
Minimum trading unit |
|
Stock split |
|
Listing on another stock exchange |
|
Bonus issue |
|
Rights issue |
Number of studies conducted in different
markets has show that the value of the firm is enhanced
with the increase in its investors’ base. But
this phenomenon is not completely true for all the companies
across sectors. This paper describes the study conducted
on Indian companies selected from different sectors
of the economy. The study is purely based on those companies
which are listed on Indian stock exchanges. The study
covers the impact of bonus issue, rights issue, stock
split, dividend, EVA and P/E Ratio of a company on its
share price. It is based on the data pertaining to a
sample set of companies chosen from different sectors
and also on literature review on this topic.
The study is done keeping the result
of the existing surveys on the topic as base and an
effort is made to establish empirical evidence as to
how far these results holds good in Indian context.
The period chosen for the study extends over 5 years
from 1994 – 1999.
Author
Giridhar Govardhan
To know more about Wipro in finance, go to www.wipro.com/finance
|
