STOCK DIVIDENDS 
While under the wording of the resolution the stock dividends and 
capitalization of each of these corporations for equal periods before 
and after the stock dividend decision were all that the commission 
was required to report, such a comparison would not give an accurate 
picture of the importance of stock dividends before and after that 
decision on account of the element of statistical bias resulting from 
selecting for the comparison only those companies which issued 
stock dividends after the decislon. This bias is explained in the 
following excerpts from a memorandum from the chief economist 
to the commission dated December 30, 1926, written in view of the 
wording of the last clause of the preamble of the resolution, which 
clearly indicates the desire of the Senate to “be fully informed as to 
the extent of this practice” (stock dividends) for purposes of legisla- 
tion. 
In answering Senate Resolution 304, regarding corporations that have paid 
stock dividends, one method of procedure would be to consider only corporations 
that have paid stock dividends since March 8, 1920 (the date of the stock 
dividend decision). 
* * 
To do this, however, would not be a scientific procedure, nor would it con- 
stitute a fair presentation of corporation stock dividend policy, because there are 
probably many of them which paid stock dividends prior to 1920 which have 
paid none since. To answer the resolution properly, therefore, it is desirable 
that corporations paying stock dividends prior to 1920 should also be asked to 
furnish their dividend data since that date. 
In accordance with this memorandum the commission on January 
26, 1927, authorized the broader inquiry. Following this ruling the 
names of all corporations which were reported to have issued a stock 
dividend, or appeared to have done so, in any one of the seven years 
from 1913 to 1919, inclusive, were drawn off from the financial 
publications mentioned above. These names were combined with 
those reporting the payment of dividends in any one of the seven 
years 1920 to 1926, inclusive, and, eliminating all duplications, gave a 
total of over 18,000 names. 
A schedule (Appendix 2) was then prepared and mailed to each 
corporation on the list. This schedule requested the corporation to 
report (1) the amount charged against surplus on account of (a) 
cash, (b) stock, and (¢) “other dividends’’ paid in each year from 1913 
to 1926, inclusive, and (2) the (a) outstanding capital stock, (b) 
surplus shown by the books, and (¢) date of closing for each of the 16 
years 1912 to 1927, inclusive.’ 
Neither the cash and other dividends nor the surplus were called 
for specifically by the resolution, but in order to Fi advise the 
Senate as to the importance of stock dividends, this information 
was deemed necessary for the purpose of making certain comparisons 
hereinafter presented. In addition, the surplus data were regarded 
as, and subsequently proved to be, a valuable check on changes in 
capitalization through the issuance of dividends and otherwise. 
None of these three items, however (surplus, cash, or other dividends), 
has been shown for any specific corporation, as this was not called 
for by the terms of the resolution nor necessary for a proper pre- 
sentation of the facts. Their sole use has been in the preparation 
>. 4 
1 Capital stock and Sorps were requested for 16 instead of 14 years in order to cover gorperationy with 
either a calendar year or fiscal year closing and to obtain the capitalization and surplus as of the begir ning 
of the first year and end of the last year for the entire period.