All icing, no cake: are bonuses and splits overrated?

A company's announcement of bonus shares or stock splits cheers its retail investors. But are these announcements actually favourable for investors? Although the company may promote bonus shares as free shares, the issuance of bonus shares is only an accounting entry where the company transfers the amount of additional shares from reserves (retained earnings) to the share capital account, leaving no impact on the company. In the stock market, the value of a stock falls in proportion to t

This article was originally published on August 16, 2019.