ABSTRACT: This paper examines the effect of right issue announcements on stock returns in banking sector during July 2007 to July 2017. For this event study methodology has been used. Daily closing stock price data of five sample banks over the period from 90 trading days before to 10 trading days after the rights issue announcement date are used to ascertain whether there are any abnormal returns associated with rights issue announcements. The event date is defined as the date of right announcement by the banks. Abnormal returns and cumulative abnormal returns are calculated by using market model of event study method. T-test is conducted to test the significance of cumulative abnormal returns. The paper concludes that rights issue announcement yields a mix of positive and negative cumulative abnormal returns around the announcements date; however, these returns are statistically not significant.

KEYWORDS: Abnormal returns, cumulative abnormal returns, event study, Rights issue