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Empirical studies in India and abroad have proved that there is significant abnormal return around bonus issue announcement. This study was conducted to analyze the retail investors’ perception towards bonus issue on shares by listed companies. It tries to understand the retail investors’ understanding about the financial mechanism of the bonus issue, perceived impact of bonus issue on the Company’s financial ratios and the factors that influence the retail investors’ activity level around bonus issue announcement.  The study revealed that the investors’ decision to invest in bonus announcing companies does not depend upon factors like their age, sex, education, or investment period and depends on factors like investment objective and risk appetite. The investors graded the performance of the company and the size of bonus issue as the most important factor that influence their decision. The study showed low levels of awareness about the financial mechanisms of bonus issue among retail investors.

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