What is a major consequence of a stock split?

A stock split occurs when a company divides its existing shares into multiple new shares to lower the trading price of its stock. This adjustment increases the total number of shares outstanding while keeping the overall market capitalization unchanged. One of the primary effects of a stock split is enhanced liquidity in the market.

When a company's shares become more affordable due to a reduced share price, it often attracts a broader base of investors. More investors participating in buying and selling the shares can lead to increased trading volume. This heightened activity improves liquidity, making it easier to buy and sell shares without significantly impacting the stock price. This aspect is crucial, as liquidity tends to signal a healthy market, reducing the cost of trading for all participants.

The other consequences mentioned in the options do not align with the core effects of a stock split. For example, a stock split does not increase the total market capitalization of the company; it remains the same because the value of the shares is adjusted accordingly. Greater stock price volatility is not a guaranteed outcome of a stock split, as the action itself is more about share distribution than market behavior. Lastly, a stock split typically does not lead to a decreased public perception of the company; in fact, it may often be viewed positively, as it may indicate that