Why the Par Value of Share Matters to Investors

• Main Authors: Tadeusz Dudycz, Bogumiła Brycz
• Format: Article
• Language: English
• Published: MDPI AG 2021-03-01
• Series: International Journal of Financial Studies
• Subjects: par value; financing; share premium; share capital; signaling; face value
• Online Access: https://www.mdpi.com/2227-7072/9/1/16

The purpose of the study is the analysis of the relationship between the par value (also known as nominal value or face value) and the parameters influencing a company’s financing. Additionally, the utility of the par value as a manipulation tool for equity offerings is examined. The study is based on a sample of IPO firms which went public on the Warsaw Stock Exchange. The study finds that an excess supply of shares has a negative impact on their valuation. In contrast, decreasing the par value prompts perceptual biases among investors beneficial to the success of the issuance. Moreover, share capital is found to be a useful signaling tool to improve the company’s position on the financial market.