What are corporate actions?
A corporate action is any event that brings material change to a company and affects its stakeholders, including shareholders, both common and preferred, as well as bondholders. These events are generally approved by the company’s board of directors; shareholders may be permitted to vote on some events as well.
The most common corporate actions include:
- Cash dividend: money paid to stockholders out of profits or earnings, they are taxable as income for the recipients
- Stock split: an issue of new shares to existing shareholders in proportion to their current holdings
- Rights Issue: An offer of securities to existing shareholders in proportion to their shareholding. This enables shareholders to subscribe for additional shares at a pre-determined price
- Buy Back: The purchase of its own shares by a company. Shareholders can sell their shares back to the company for the Buy Back price
- Bonus Issue: When additional shares are issued by a company on a pro rata basis for free