How do companies make a choice between whether to issue bonus shares or split the par value of shares?

If you have been in the stock markets for some time, you would have by now heard the famous story of how Wipro could have made you a dollar millionaire many times over in the last 38 years. That is, of course, assuming that you resisted the temptation of investing Rs.10,000 in buying a Bajaj Scooter in 1980 and had bought 100 Wipro shares instead.

By now you are really confused. Did the bonus issues create the wealth or was it created by stock splits? The answer is “Neither”. Both bonuses and splits are value neutral and it is the financial performance of Wipro over the years that has helped create wealth. What bonuses and splits have done is to keep the stock price of Wipro within an acceptable range so as to elicit investor interest.