Final answer:
Stock splits and stock dividends do not change total shareholder equity; they merely increase the number of shares outstanding while maintaining the same market value and ownership proportions.
Step-by-step explanation:
Stock splits and stock dividends cause total shareholder equity (or stockholders' equity) to remain the same. When a company decides to perform a stock split or issue a stock dividend, the number of shares outstanding increases, but the proportional ownership in the company does not change. For example, if a company with 1 million shares performing a 2-for-1 stock split will have 2 million shares, but the total market value remains the same because the share price is adjusted accordingly. Similarly, a stock dividend will increase the number of shares held by each shareholder without changing their percentage of ownership or the market value of the company. These actions are often taken by companies to make their stock appear more affordable to small investors and to increase liquidity in the stock.