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when a company is doing really really well you might hear that theyve decided to do a stock split so you might be wondering what a stock split is and what the economic effect of a stock split is its best to just jump right in with an example to illustrate what a stock split is so lets say that there was a firm that just had a hundred shares outstanding all right so theres just a hundred shares of this firm lets say that the par value is ten cents a share ten cent part so now the firm just says okay look everyone were doing a two-for-one split so this hundred shares are now two hundred shares so theres two hundred shares and they have a par value of instead of ten cents now its five cents so its its basically theyre theyre doubling the amount of shares now you might say hey how can they do that what are they just creating shares well theyre not giving shares these extra hundred shares to like other people or something thats diluting the current owners ownership so if you