Stock dividends have been issued by many corporations all over the world. Many people believe that shareholders do not benefit
from receiving stock dividends. Stock dividend do not affect shareholder's equity, but it changes it's composition, because as a
result of issuing stock dividend, retained earinings is reduced and the capital is increased by the same amount. From the economic
point of view, stock dividend has no real value, because the value of each stock is reduced proportionately. So this question will be raised that "Why Corportions Issue Stock Dividend?"
This article will summarize many of the articles which were written about this subject. Four hypotheses are offered:
1- Signalling hypothesis, 2- Liquidity hypothesis,
3- Optinal price range hypothesis, and
4- Stock dividend as a substitute for cash dividend hypothesis