Corporate Action
Any event initiated by a company that changes its securities or affects its shareholders' holdings.
How it is identified
Test: the event alters the number, value, or form of the shares held, or distributes something to holders on a record date
Unit
qualitative
In depth
Corporate actions divide into mandatory ones such as dividends, splits and bonuses that happen automatically, and voluntary ones such as rights issues and buyback tenders where the shareholder must choose. Each has a record date that determines entitlement, and each requires price history to be adjusted so charts do not show phantom crashes. Data providers that fail to adjust produce series showing a 50% fall on the day of a 1:1 bonus, which is one of the most common causes of corrupted backtests. Missing a voluntary action's deadline simply forfeits the entitlement, with no recourse.
Worked example
A 1:1 bonus doubles the share count and halves the price. An unadjusted chart shows a 50% fall on the ex-date; the holder's value is unchanged, and only the arithmetic of the display went wrong.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Corporate Action” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.