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Stock split is a change in the number of outstanding shares, the par value and the number of authorized shares, which has been approved through a vote of the shareholders. Forward stock splits increase the number of shares outstanding and reduce the stock price, in order to make the security more attractive to individual investors.
A corporation from time to time may wish to split its shares to make them more attractive to investors. A forward stock split will increase the number of shares and reduce the price of the security in the market place. Individual investors generally feel more comfortable purchasing shares of a $20 than shares of a $200 stock. If a stock price has declined a corporation may want to reverse split its shares to increase the price to make the stock more attractive to institutional investors. Institutions generally feel more comfortable purchasing shares of a $50 stock than shares of a $5 stock.