Question

A stock split should have no effect on value but it does seem to affect a firm
stock price. How would you reconcile this contradiction? Substantiate with
suitable examples.

Answer 1

Answer:

If you own a stock that declares a split, the number of shares you would own after the split increases. However, the price per share reduces. This is because the market capitalisation remains the same. So, as an investor, though the price you get for each share actually declines, the total number of shares increases.