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 dividends and Stock splits decrease the price per share of the common stock but should not increase the total market value of all common stock outstanding unless other positive things are perceived to take place. Many companies consider that a stock split or stock dividend makes their stock more affordable and thus more attractive to a wider range of potential investors.