Dividend Policy a) Stock splits are said to be cosmetic events and yet investors react positively to...

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Finance

Dividend Policy
a) Stock splits are said to be cosmetic events and yet investorsreact positively to stock split announcements. Explain why stocksplits are considered as cosmetic events and briefly discuss whythe market reacts positively to such events.
Mergers and Acquisition
b) Briefly discuss one reasons why takeovers occur.

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Stock splits are defined as issue of new shares to the existing shareholders in proportion to their current holdings with the company Stock splits are considered to be cosmetic events because the cash flows of the company are unaffected the shareholder retains his proportionate ownership the claims of other classes of security holders also remain unaltered The stock split See Answer

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Dividend Policya) Stock splits are said to be cosmetic events and yet investorsreact positively to stock split announcements. Explain why stocksplits are considered as cosmetic events and briefly discuss whythe market reacts positively to such events.Mergers and Acquisitionb) Briefly discuss one reasons why takeovers occur.