What is the effect of stock (not cash) dividends and stock splits on the market price of common stock? Why do corporations declare stock splits and stock dividends?
Stock splits and stock dividends reduce the price each share of the common stock but must not increase the total market value of all common stock outstanding if not other positive things are perceived to take place. Several companies believe that a stock split or stock dividend makes their stock more affordable and hence more attractive to a wider range of potential investors.