why would a company issue common stock with par value?


5 Answer(s)


PAR VALUE IS THE MINIMUM AMOUNT THAT A COMPANY IS FIX FOR THE SHARE
PER VALUE MULTIPLIED BY NUM OF SHARES IS KNOWN AS SHARE CAPITAL RESERVE

it is the minimum price at which share is issued.it canbe done to attract the investor it pave the way as a safeguard tools.

thanks Ejazul for your quick answer. However, why would a company issue common share with par value when it can gets much more if it sells at market price. for example HAL share has never been less than $28 in year 2010 or 2011 but if you see below [ from balance sheet] company sells the share at par value.

Year 2011 2010
Common shares, par value $2.50 per share – authorized 2,000 shares, issued
1,073 shares and 1,069 shares 2,683 2,674
Paid-in capital in excess of par value 455 339

Mattews, still waiting for the answer.

Yasar, Shares are always priced like this -> Par value + Share premium = Market Value.
No company ever gives away its shares at par value if the market value is higher. In the above example you quoted the line item "Paid-in capital in excess of par value" reflects the share premium and hence combined with the par value indicates the market value.