... firms need cash. A firm can distribute its earnings to shareholders in the form of stock dividend. This dividend does not pay any cash out but just increase the number of shares outstanding of shareholders and therefore reducing the value of each share. Similar to stock dividend, stock split is another kind of non-cash dividends which is very much like a stock dividend. However, there is a technical distinction between them: 'a stock dividend is shown in the accounts as a transfer from retained earnings to equity capital, whereas a split is shown as a reduction in the par value of each share' (Brealey, R. D. & Myers, S. C. 1996: 419). The rare form of dividend is concession, which distribute shareholders physical products. Obviously it is just a means of attracting small shareholders who can benefit from it personally. 2 The Importance of Dividend Decision Firms consider the dividend decision ...

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