Abstract
This paper explains the relationship between the investors’ base of a firm and the value of the firm. Empirical studies on this topic show that “An increase in the relative size of the firm’s Investor base will reduce the firm’s cost of capital and increases the market value of the firm. Thus managers of the firm have an incentive to expand the firm’s investor base”. A firm can increase its investors’ base by any of the following ways

	Minimum trading unit
	Stock split
	Listing on another stock exchange
	Bonus issue
	Rights issue

Number of studies conducted in different markets has show that the value of the firm is enhanced with the increase in its investors’ base. But this phenomenon is not completely true for all the companies across sectors. This paper describes the study conducted on Indian companies selected from different sectors of the economy. The study is purely based on those companies which are listed on Indian stock exchanges. The study covers the impact of bonus issue, rights issue, stock split, dividend, EVA and P/E Ratio of a company on its share price. It is based on the data pertaining to a sample set of companies chosen from different sectors and also on literature review on this topic.

The study is done keeping the result of the existing surveys on the topic as base and an effort is made to establish empirical evidence as to how far these results holds good in Indian context. The period chosen for the study extends over 5 years from 1994 – 1999.

Author Giridhar Govardhan

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