small vs large stock dividend

Joined
Nov 30, 2012
Messages
3
Reaction score
0
Hi everybody,
my question is WHY we use the fair market value for small stock dividend and not the par value?? and vice versa!!
thanks in advance
 

Triest123

VIP Member
Joined
Feb 12, 2012
Messages
269
Reaction score
51
Hi everybody,
my question is WHY we use the fair market value for small stock dividend and not the par value?? and vice versa!!
thanks in advance
As the small stock dividend slightly, or even do not, affect the market price of shares,
the "best" benefit that the shareholder obtain is that the extra shares can be sold at the
current market price, which in turn is the value of the stock dividend (i.e. the opportunity cost approach)

Unlike the large stock dividend, they would affect the market price significantly.
The market price of the share will drop dramatically if the large stock dividend is declared,
just like the stock-split.

Since the extra shares (obtained by the shareholders) cannot be sold at the
current market price, so the value of the stock dividend is stated at the par value
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top