Answer: decreases the share price.

## Explanation A stock dividend involves issuing additional shares to existing shareholders without any cash payment. When a company issues a stock dividend: 1. **The total market capitalization remains unchanged** - The company's total value doesn't change because no new capital is raised 2. **The number of shares outstanding increases** - More shares are issued to existing shareholders 3. **The share price decreases proportionally** - Since total value is spread over more shares **Example**: If a company with 1 million shares outstanding at $100 per share (total market cap = $100 million) issues a 10% stock dividend: - New shares outstanding = 1,100,000 - New share price = $100 million ÷ 1,100,000 = $90.91 The share price decreases to maintain the same total market capitalization. This is different from a cash dividend, which transfers value from the company to shareholders and may affect share price differently. **Key Concept**: Stock dividends are essentially a stock split in disguise - they increase the number of shares outstanding without changing the company's fundamental value, leading to a proportional decrease in share price.

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