Corporate action - Financial definition
Financial acronyms
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Concise definition of the term corporate action
A corporate action is an event in the life of a security that in some way impacts a position in that security.
Comprehensive definition of the term corporate action
A corporate action can impact both shareholders and bondholders.
Types of corporate actions
There are three basic types of corporate actions:
Mandatory corporate actions
In a mandatory corporate action, the position holder has no choice as to whether and/or how he participates in the event.
Examples of mandatory corporate actions would be cash dividend payment, stock splits, mergers or spin-offs.
Voluntary corporate actions
In a voluntary corporate action, the participation in the event is based solely upon the choice of the position holder.
Examples of voluntary corporate actions would be rights issues or buyback offers.
Mandatory corporate actions with choice
In a mandatory corporate action with choice, the position holder's participation is mandatory, but he can do so in two or more alternative ways.
An example for a mandatory corporate action with choice would be a dividend payment which can be received in cash or as a stock dividend.