Stock Dividends being purely a redistribution of funds between reserves and paid up share capital does not affect the firm's net worth, and should therefore have no impact on share prices and trading volume. This has been supported by the findings o f some empirical studies but a number o f studies have also shown a positive relationship between bonus issue announcements and the share prices. The lack o f conclusive evidence for the same prompted the present study The study provided evidence o f the signaling hypothesis as a significant positive abnormal return of 1.983yo was found on announcement day