Stock dividends and stock splits should, at least conceptually, have the same effect on shareholders' wealth. True or false?

Question

Business

Dillan Hopkins

17 September, 15:15

Stock dividends and stock splits should, at least conceptually, have the same effect on shareholders' wealth. True or false?

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Answers (1)

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Chaya Horn · Answer 1

The correct answer is True.

Explanation:

The dividend in shares is a distribution of benefits, through which a corporation distributes to its shareholders shares released from the issuance itself or shares of open stock companies that the company owns.

A division of shares is a corporate action that increases the number of shares in circulation of the company by dividing them, which in turn decreases its price. The market capitalization of the share, however, remains the same, just as the value of the $ 100 bill does not change if it is exchanged for two of $ 50. For example, with a division of shares of 2 by 1, each shareholder receives an additional share for each share held, but the value of each share is reduced by half: two shares now equal the original value of a share before the division.