Do stock splits create value? Consider the analogy of having a lump of gold (set volume,...

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Do stock splits create value? Consider theanalogy of having a lump of gold (set volume, the form has novalue, such as a minted, limited edition coin may have). Would youconsider going to your shop and sawing your lump of gold into 2pieces (a “gold split”), so that you would be wealthier with 2pieces of gold? What are some of the “transaction costs” ofexecuting this “gold split”? Consider another analogy of going outto pizza with your friends. If on a particular night your groupfeels extra hungry, would it make sense to say to the pizza shop:“Hey, you know that pizza we usually order and you serve cut in 6pieces? Would you split those pieces & cut it into 12 piecestonight, since we are all extra hungry and want more “value”?

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Answer Theoretically stock splits does not create value to the investors Stock split does not change the fundamentals of the company and moreover there is no change in the earnings and equity base capital The stock split See Answer

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Do stock splits create value? Consider theanalogy of having a lump of gold (set volume, the form has novalue, such as a minted, limited edition coin may have). Would youconsider going to your shop and sawing your lump of gold into 2pieces (a “gold split”), so that you would be wealthier with 2pieces of gold? What are some of the “transaction costs” ofexecuting this “gold split”? Consider another analogy of going outto pizza with your friends. If on a particular night your groupfeels extra hungry, would it make sense to say to the pizza shop:“Hey, you know that pizza we usually order and you serve cut in 6pieces? Would you split those pieces & cut it into 12 piecestonight, since we are all extra hungry and want more “value”?