A rights issue is a way by which a listed company can raise additional capital. However, instead of going to the public, the company gives its existing shareholders the right to subscribe to newly issued shares in proportion to their existing and market capitalization. The study sought to determine whether a rights issue announcement has any effect on the share prices for companies listed at the Karachi Stock Exchange. This topic helps us to enhance the knowledge regarding the stock market and the share prices. Data were collected from 32 companies, with the help of secondary data from the KSE capturing stock prices, market index, and announcement dates being collected. After collecting the data, data were analyzed through chow test to determine whether there is any significant impact of share prices on right issue announcement, the price of share is increasing or decreasing. The study found out that mostly share prices change after announcement of right issues in stock market, the research concluded that our alternative hypothesis is valid which means that there is a significant effect of rights issue announcement on share price of companies listed at the KSE. Additionally, managers of the companies sought rights issues to encourage investors to purchase their stock which appeared cheaper. There were positive mean returns with respect to rights issue announcement. This implies that the null hypothesis was not accepted and instead, the alternative was as therein deed was a relationship between rights issue announcement and share prices.