Unlocking Bonus Shares

The special report in a recent issue of DSIJ gave some good insights on understanding bonus shares. I wanted to know how evolving market conditions or economic factors impact the prevalence of bonus shares. - Jenil K

Editor Responds: We appreciate your kind words of encouragement. To answer your query, evolving market conditions and economic factors can significantly impact the prevalence of bonus shares in several ways. Firstly, during periods of economic growth and favourable market conditions, companies tend to generate higher profits. As a result, they may choose to distribute bonus shares as a means of rewarding existing shareholders without affecting their cash reserves. Conversely, during economic downturns or market volatility, companies might opt to conserve cash and refrain from issuing bonus shares.

Furthermore, market conditions can influence investor sentiment and demand for bonus shares. If investors perceive bonus shares as a valuable incentive, companies may be more inclined to offer them. On the other hand, if market participants prefer alternative forms of shareholder rewards such as cash dividends, companies may adjust their strategies accordingly. Additionally, regulatory changes or shifts in investor preferences towards other investment opportunities such as alternative assets or digital currencies could also impact the prevalence of bonus shares. Hope this helps. Keep writing to us.