Final answer:
Corporations may choose to distribute stock dividends for two main reasons: return on investment for shareholders and increased market visibility and access to capital.
Step-by-step explanation:
There are two main reasons why a corporation may choose to distribute stock dividends:
- Return on Investment: When a corporation distributes stock dividends, it provides a direct payment to its shareholders. This allows the investors to receive a rate of return on their investment. The dividend can be in the form of cash or additional shares of stock.
- Market Visibility and Access to Capital: By issuing stock and distributing dividends, a corporation increases its visibility in the financial markets. This can attract more investors and provide access to large amounts of financial capital for expansion. It also allows the corporation to finance its growth without worrying about repaying the money.