What is Corporate Action?
Corporate action is usually defined as any action on the part of a company that has a direct impact on the shareholders of the corporation. The impact is of a nature that the input of the shareholders is considered either desirable or mandatory, depending on the terms outlined in the founding documents of the company. Essentially, any action of a corporation that will affect the value of the investment made by a shareholder is considered to be a corporate action. Some types of corporate action are very well defined and apply to companies in just about any industry or field. Common corporate actions include mergers or proposed actions that will impact the distribution of dividends to the stockholders. In the event that corporations wish to split stocks, the input of shareholders is often considered necessary and thus constitutes a corporate action. Even the acquisition of another company by the corporation is likely to be classified as a corporate action that requires input from shareho
Distribution of dividend or interest payments, issue of rights or bonus securities, consolidation of holdings or issue of another security on account of merger or demerger, calling money on partly paid securities, buyback or open offer, etc. are normally the purposes for which issuer sets up corporate action to consider benefits or entitlements of holder.
A corporate action is an event initiated by a public company that affects the securities (equity or debt) issued by the company. Some corporate actions such as a dividend (for equity securities) or coupon payment (for debt securities (bonds)) may have a direct financial impact on the shareholders or bondholders; another example is a call (early redemption) of a debt security. Other corporate actions such as stock split may have an indirect impact, as the increased liquidity of shares may cause the price of the stock to rise. Some corporate actions such as name change have no direct financial impact on the shareholders Purpose:1).Return profits to shareholders 2).Influence the share price 3).Corporate Restructuring Types:1).Mandatory Corporate Action(ex: its includes stock splits, mergers, and spinoffs) 2).Voluntary Corporate(it includes rights issue, making buyback offers to the share holders while delisting the company from the stock exchange etc.
