Sample Thesis Paper

The book value of a company may change due many factors. The changes n the book value are expected to be reflected in the market values of the shares (Abarbanell and Bushee, 1997). The book value is therefore taken as the independent variable and the market value the dependent variable.  The factors that affect the book value of shares are as follows:

Issuance of Shares at a Premium: The book value measures the assets held by a company per unit of share issued by the company. During the life of the business there arises a need for additional capital. Capital to a business can only be sourced through the issuance of new shares or by borrowing. When new shares are issued the number of outstanding shares used in the calculation of the book value changes while the assets also changes with the amount of cash received from the issuance of the shares.  In most case due to the reputation built by the business over time, the business is able to issues new shares at a price that is higher than that of the existing shares (Copeland et al. 2000). The margin is usually referred to as a share premium and is added into the reserves of the company that are available for distribution. The additional premium belongs to the business as whole and even the existing shareholders have a claim on it. In the calculation of the book value per share after issuance of new shares at a premium the book value increases. The higher the amount of the share premium the bigger the increase in the book value after the new issuance. In some instances the company may also issue shares at a discount or a price that is lower than the rice of the existing shares. Such issuances are made to members of the company or when the company is experiencing financial distress. In such circumstances the effect is the opposite of the effect caused by a share premium. The resultant book value per share is usually lower after the issuance (Dimson et al. 2003).

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