Market reactions to capital increases: Insights from asset revaluation in pharmaceutical companies on the stock exchange

This study investigates the impact of capital increases on market reactions, focusing specifically on pharmaceutical companies listed on the Tehran Stock Exchange (TSE). We analyze stock returns over a six-month window: three months preceding and three months following the announcement of capital increases. Employing the market model, we assess investor responses and the revaluation of assets associated with these capital injections. Our comprehensive sample includes 200 pharmaceutical firms selected through systematic random sampling, covering the period from 2017 to 2023. The results reveal that asset revaluation significantly enhances investor reactions compared to capital increases stemming from cash contributions and retained earnings. Furthermore, our findings underscore the critical role of information transparency from company management in shaping market responses. This research contributes to a deeper understanding of investor behavior and informs management strategies related to capital restructuring in the dynamic pharmaceutical sector.